Chapter 5.3, Problem 3R

To determine

To explain about the choice of an individual for either renting a house or buying it.

Answer to Problem 3R

The choice between renting a house or buying it depends upon the market scenario. If people find the market with huge profit in the real estate with the rising values of the assets, owing would be preferable.

On the other hand if people find less increment in the value of the properties, then renting might be a better option to go for.

Explanation of Solution

There are various advantages of both renting and owning a house.

Considering about the advantages of owning a house rather than renting:

• Ownership of a house provides people with security of an asset created for life.
• Buying a house on EMI is costly but with every month people pay the EMI, they get close to create an asset of their own while in renting this doesn’t happen as people pay huge rents every month just for the shelter.
• Buying a house gives an extra benefit in the future as its value increases in the long period.
• Buying a house keeps people away from the issues of changing the house frequently, which saves a lot of time of them.

Advantages of renting over buying a house:

• Renting keeps people away from the stress of huge EMIs and other expenses related to the maintenance.
• Renting allow to switch to different places as per the requirements of the work which is really beneficial as people can’t take their owned house wherever they want to.
• Renting allows the same comfort of living in a luxurious house by paying INR 15000-20000 rather than buying it for INR 6000000.

Economics Concept Introduction

Introduction:

Owning a house in metro city is still a dream for many people as the prices are too high. Although who can afford it, prefer owing rather than renting a house as it provides a feel of security to the people.