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To rent or to buy – Property Transaction preference in India? What does the data suggest?

Published Aug 31, 2020

To answer the above questions let us consider the two biggest metros of the country which contribute to more than 50% of the organized real estate value. The numbers are agnostic to the asset class and provide a clear flavour for the preference of the transaction.

*Source – Sub-Registrar records of respective cities

Looking at the transaction trend between sale and lease from 2013 to 2019, it is quite evident that lease transaction in both cities are steadily growing at an average pace of 8% and 12% annually in Mumbai and Delhi respectively. At the same time the sale transaction growth is at 5% and 2% only. If you remove the sale transaction spikes recorded in 2018, growth stands at -4% and -2% respectively.

Mumbai surely prefers to stay on rent in comparison to Delhi. For every sale in Mumbai the average lease is 2.5x and for every sale in Delhi there 0.65x of lease. The lease in Mumbai almost was 3.5x to sale in 2019 and trend on the graph suggest it is widening every year. While the rent to area affordability in Delhi is cheaper than Mumbai, the preference is bend towards sale than to lease.

The flattened numbers, in sales transactions, in both cities between 2013 and 2017 clearly indicate sale saturation of any developed property transaction market. While not much has changed in Mumbai in sales transactions between 2013 and 2019, Delhi has witnessed a sudden spike in registrations in 2018 which could be due to highest number of blocks on sale from DDA of approx. 20,000.

In our view, the gap between both transaction types (sales and leases) will further increase in Mumbai, making Mumbai glued towards rent. Delhi equation would remain the same since the biggest development is by the state controlled body. Matured markets suggests increasing lease transactions in any market suggests higher stress level in selling or creating liquidity for a property.

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