How the Rent vs Buy Comparison Works
To compare fairly, the calculator assumes both people spend the same amount every month:
- The buyer pays the down payment, stamp duty and registration, and the EMI.
- The renter invests the money the buyer spent upfront, pays rent, and invests the difference between the EMI and the rent every month.
- When rent becomes higher than the EMI, or after the loan ends, the buyer invests the difference instead.
At the end, the buyer's net worth is the home's value minus any loan left plus their investments. The renter's net worth is their investments.
How to Use This Rent vs Buy Calculator
- Enter the home price, your down payment, and the loan rate and tenure.
- Enter the monthly rent for a similar home and how fast rent rises each year.
- Set how fast you expect the home price to grow and what return your investments can earn.
- Choose how many years to compare.
The calculator includes 7% of the price for stamp duty and registration. The table above shows both net worths every year.
Example: ₹80 Lakh Home Over 20 Years
- Buy: ₹16 lakh down payment (20%), ₹5.6 lakh stamp duty and registration, ₹64 lakh loan at 8.5% for 20 years. EMI: ₹55,541.
- Rent: ₹25,000 a month for a similar home, rising 5% a year.
- Home price grows 5% a year; investments earn 10% a year.
Here, renting and investing comes out ahead, but only because the renter invests ₹21.6 lakh upfront and about ₹30,000 every month in the early years. If that money gets spent instead, buying wins easily.
Year-by-Year Snapshot
| Year | Home value | Loan left | Net worth if you buy | Net worth if you rent |
|---|---|---|---|---|
| 1 | ₹84.00 L | ₹62.73 L | ₹21.27 L | ₹27.70 L |
| 5 | ₹1.02 Cr | ₹56.40 L | ₹45.70 L | ₹57.36 L |
| 10 | ₹1.30 Cr | ₹44.80 L | ₹85.52 L | ₹1.10 Cr |
| 15 | ₹1.66 Cr | ₹27.07 L | ₹1.39 Cr | ₹1.90 Cr |
| 20 | ₹2.12 Cr | ₹0 | ₹2.14 Cr | ₹3.14 Cr |
The Price-to-Rent Check
Rent yield is the yearly rent divided by the home's price. In many Indian cities it is only 2–4%, while home loan rates are much higher. That is why renting often looks better on paper.
The higher the rent compared with the price, the better buying looks. For the same ₹80 lakh home:
| Monthly rent | Net worth if you buy | Net worth if you rent |
|---|---|---|
| ₹20,000 (3.0% yield) | ₹2.12 Cr | ₹3.65 Cr |
| ₹25,000 (3.75% yield) | ₹2.14 Cr | ₹3.14 Cr |
| ₹35,000 (5.25% yield) | ₹2.40 Cr | ₹2.32 Cr |
How Home Price Growth Changes the Answer
| Home price growth | Net worth if you buy | Net worth if you rent |
|---|---|---|
| 3% a year | ₹1.46 Cr | ₹3.14 Cr |
| 5% a year | ₹2.14 Cr | ₹3.14 Cr |
| 7% a year | ₹3.11 Cr | ₹3.14 Cr |
If you buy in an area where prices grow fast, buying and renting end up almost equal. Location matters more than anything else.
Beyond the Numbers
- Discipline: renting wins only if you actually invest the difference every month, for many years.
- Stability: owning means no landlord, no forced moves and freedom to renovate.
- Flexibility: renting makes it easy to move for a job or a better school.
- Tax benefits: under the old regime, home loan interest and principal give tax deductions. They are not included here.
- Other costs: maintenance, society charges and property tax add to the cost of owning. They are not included here either.
Frequently Asked Questions
Is it better to rent or buy a house in India?
It depends on rent compared with price, home price growth, your loan rate and whether you invest the money you save by renting. Financially, renting and investing often wins when rent yields are low. Buying wins when rents are high or prices grow fast.
How much down payment do I need to buy a home?
As per RBI rules, banks can lend up to 90% of the property value for loans up to ₹30 lakh, 80% for loans of ₹30–75 lakh and 75% above ₹75 lakh. You pay the rest, plus stamp duty and registration, yourself.
Does this calculator include tax benefits on home loans?
No. Home loan tax deductions are available only under the old tax regime and depend on your situation, so they are left out to keep the comparison simple.
What investment return should I assume?
For a long-term mix of equity mutual funds, 10–12% a year is a common assumption. Use a lower figure to be conservative.
How much are stamp duty and registration charges?
They vary by state, usually around 5–7% for stamp duty plus about 1% for registration. The calculator uses 7% in total.
Why does renting often come out ahead?
Because rent in India is usually only 2–4% of the property value each year, while loan interest is much higher. The renter invests the difference, and compounding does the rest, as long as they stay disciplined.
