Is renting a house better than buying one?

The question has most Indians—especially Bengalureans—divided. However, soaring rents in India’s Silicon Valley, where thousands move to work each year, seem to have tilted the scales in favour of purchasing. And many of these first-time home buyers are fairly young—millennials and Gen Z—which is interesting because the city’s inflated real estate bubble would give one the opposite impression.

Data from property listing platform NoBroker showed that just in the first 6 months of this year, over 60% of property purchases in Bengaluru on its platform were by millennials—those born between 1980 and the mid-1990s—and Gen Z—born between the mid-1990s and 2010-12. This is a reversal from the “renting trend” seen in India a decade ago, when people increasingly preferred to rent homes instead of buying owing to high costs and the short-term convenience they offered.

So, what’s behind this change?

Impractical to rent: Very simply, the rents are just too high. After the COVID-19 pandemic, rents in Bengaluru—especially in prime residential areas—surged rapidly, rising by as much as 50%. Real estate agents The Morning Context spoke to said that this year, rents for 2-bedroom apartments in prime areas such as Indiranagar or MG Road were averaging at Rs 50,000-65,000 ($596-$775) a month while 3-bedroom apartments were around Rs 80,000 ($954). At these levels, they almost paralleled loan EMIs for properties in many of the city’s outskirts.

Which is why this rise has pushed many young professionals to buy properties. Property dealers in Bengaluru say that unlike earlier, many in the 25-35 age group, who would otherwise prefer to rent or lease, are coming to them to invest. The median age of first-time home buyers has dropped from 42 to 34.

Here, it’s important to note that these new home purchases are skewed towards the city’s outskirts—as these far-off areas are where new buyers can afford to buy homes.

The outskirts are booming: The city’s tech corridors, such as Outer Ring Road, Whitefield and Sarjapur Road, see a lot of demand from potential, young homebuyers, who often come to the IT hub in search of jobs.

“About 80-90% of property inquiries we receive for areas where there are more tech parks are mainly from younger buyers—mostly millennials and some from Gen Z,” says Raahil Reddy, director of Fortune Primero, a Bengaluru-based real estate agency.

It helps that many companies are now opting for a hybrid work model. When going to the office was an everyday affair, buying a home made sense only if it was close enough to the workplace. And that wasn’t always affordable. Now that a lot of work can be done remotely, buying a home that’s fairly far from your office, but is affordable, makes sense.

“Bengaluru has seen a boom in younger buyers interested in buying apartments in the outskirts of the city due to the hybrid work model where they go to office once or twice a week. Sarjapur is a good example of this. It is about 30 km from the city centre, yet projects are sold out within a week due to great demand for properties,” says Reddy.

“People working in the tech parks located in the Outer Ring Road side are willing to commute for 45 mins to 1 hour and stay in areas like Sarjapur, Akibele and Hoskote after the pandemic,” he adds.

For Jyothisha VJ, a millennial who bought a house about 14 km from her office in Bengaluru, it’s precisely the hybrid work model that pushed her to own property.

“When I first moved to Bengaluru, rents for decent 1-BHKs in gated societies were above Rs 20,000 a month ($238). Also, Bengaluru is one of the few cities where rental value can closely match the EMI burden if one chooses to rent out the property if moving out of the city,” she says. For many like Jyothisha, buying property makes sense as a future investment as well.

Better investment option: Real estate is becoming an increasingly important part of investment portfolios. While the Indian stock market has remained robust after the pandemic, young buyers still want to diversify their portfolio through real estate as many have seen their property valuations go up significantly.

“Younger people have understood the fact that real estate, whatever be the dynamics of the market, is a safe investment. Availability of information regarding investment in properties and the presence of Real Estate Regulatory Authority has also driven people to start investing in property at a young age,” a real estate expert with three decades of experience, who did not wish to be named, told The Morning Context. RERA is a regulatory body established by the central government to protect homebuyers and boost growth in the sector.

Take the case of 34-year-old Sridevi S, who purchased a 1.5-BHK residential property in a gated society in Bengaluru two years ago.

“I bought a house as the EMI for my home loan was as much as my rent. I used to live on rent in the same apartment complex in a 2-BHK and paid Rs 28,000. When there was a 1.5-BHK for sale, I bought it as an investment,” she says, adding that the house, for which she paid Rs 61 lakh, is now valued at Rs 95 lakh. That’s a significant jump.

According to a report by The New Indian Express, in the second quarter of FY24, residential properties in Bengaluru were averaging at Rs 9,299 a square foot, up 25% from Rs 7,396 a square foot during the same quarter in FY22.

The rise in home purchases is also linked to the increasing purchasing power of those living in Bengaluru. According to the Karnataka Economic Survey 2023-24, the state’s per capita income in 2023-24 has shown a 9.3% rise from the previous year. In the same time, Bengaluru’s per capita income has gone up by 22%.

Besides, there’s also been a change in people’s spending preferences after the pandemic. In the midst of uncertainty, not only do people want to safeguard their future, they also want to elevate their lifestyle. This is clear in the growing preference for luxury homes among many.

“Today, they have become more active users of their existing funds or money to be able to live in the present,” says the real estate expert quoted earlier in the story.

Cover illustration by Devyani M/ The Morning Context

Soaring Bengaluru rentals are pushing home purchases

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