In the current scenario, for the short term (say the next two years) it is advisable to stay in a rented accomodation.
But in the longer term, it is a given mandate that you must own a property - even a small 1 bedroom flat would do if one cannot afford a larger abode.
The interest rates are liable to come down again but be sure that the rates may take never go below 7%. Why? Simply because there are a lot of old and retired people who survive on interest out of retirement funds. For borrowing rate interest to touch 7%, means that the banks/FCs cannot offer more than 5.5% on FDs and this is an estimate on the higher side.
Although I said that the rates are liable to come down it may take nearly three years to see the lows of 2004. So stay in rented accomodation till then.
It saddens me to see that many people went in for floating rates at 7%~7.5% in 2004. Most were duped by the bank/HFC executives that going on a floating rate was the best option as rates were going south all the time. Also they added that fixed rates are never really fixed. However if common sense should have prevailed and one really had given a speculation on to how much the rates would fall further, he would have seen the light.
Although fixed rates also get revised, they are done so after a two year period. But my bank (ICICI) has not done so for the past two and half years.
My advice is, wait for six months. If the situation does not seem easing out then:
a) If your interest burden is killing you (going to kill you) sell your property. Depending upon when you purchased it, you would have gained considerable appreciation. If you can bear the burden then keep it and nothing below applies. b) You may loose interest benefit on Rs. 1,50,000 u/s 24 of IT-Act (a tax benefit of Rs. 51,000 approx in the highest tax bracket) but your rent paid is also completely exempt from tax to the tune of 40% of basic DA (50% in the four metros). c) The tax benefit on loan pricipal is clubbed in 80c along with PF, PPF, NSC, LIC, etc. Assuming that you have PF, PPF, LIC and using Rs. 50K plus, then the saving on principal is not of great significance. d) There is a penalty for pre-payment of loan. Every bank had their own rules. Check them out. For example, my loan agreement says that I can pre-pay only three times during a year. However my loan executive told me a loophole - he said that to avoid foreclosure charges, I could pay upto 99% of the outstanding payment without attracting any penalty. I checked in the loan agreement and there is no mention on how much I could pre-pay. It only mentions charges on full closure. e) If you are lucky to sell your property at good appreciated rate and also escape with a relatively small penalty, then use the amount that you would have paid as principal amount and invest in SIPs or PPF. PPF pays 8% and you can have PPF accounts in the name of all your family members (make sure that you don't open two PPF accounts in your own name).
Selling the property may sound defeatist at the moment but this is a short term measure only. Re-think the buying option in two/three years time. The downside is that the property prices usually never come down.
p/s. I do not claim subject expertise in any matter. I am just a commoner like most of you all. What suits to one may not sound sensible to the other.
