Rent vs Buy Calculator
Compare true costs including opportunity cost, taxes, and net worth over time.
Property
Rent
Investment & Tax
Result
Renting and investing saves ₹96,87,486 over 15 years.
Tax saved: ₹15,57,252
Monthly savings @ 12%
Assumptions: Property appreciation and investment returns are estimates. Tax benefits apply under old regime. Actual results may vary based on market conditions.
Renting vs. Buying: How to Decide?
The "Rent vs. Buy" debate is one of the biggest financial dilemmas for Indians. While our parents' generation considered buying a house the ultimate financial goal, modern economics have made the decision more complex.
In many Indian cities, property prices are high relative to rents. A flat costing ₹1 Crore may rent for just ₹25,000 to ₹30,000. In such cases, the MATH often favors renting and investing the difference (the EMI minus Rent savings). However, the EMOTION of owning a home often outweighs the math.
🏠 Why Buy?
- • Stability: No landlord can ask you to vacate.
- • Forced Savings: EMIs build an asset over time.
- • Freedom: Renovate and design as you wish.
- • Appreciation: Real estate generally beats inflation.
- • Tax Benefits: Save tax on interest and principal.
🔑 Why Rent?
- • Flexibility: Move closer to work or new cities easily.
- • Lower Monthly Cost: Rent is typically 30-40% of EMI.
- • Better Returns: Invest the savings in equity for 12%+ returns.
- • No Maintenance: Critical repairs are landlord's headache.
- • Zero Debt: No stress of a 20-year loan commitment.
The Golden Rules of Buying a Home
1. The 3-20-30-40 Rule
Don't buy a house unless the price is less than 3x your annual income, loan tenure is max 20 years, EMI is less than 30% of income, and you can pay 40% as down payment (to reduce EMI burden).
2. The 10-Year Horizon
Real estate is illiquid and has high transaction costs (stamp duty, registration). Only buy if you plan to stay in that house for at least 10 years. For shorter durations, renting is almost always mathematically superior.
Common Questions
Is it better to rent or buy a house in India?
Financially, renting often wins in Indian metros due to low rental yields (2-3%) vs high loan interest rates (8.5%+). However, buying provides intangible benefits like stability, freedom to renovate, and forced savings. The right choice depends on your time horizon – buying usually makes sense if you plan to stay 10+ years.
What is the "Opportunity Cost" in this calculator?
Opportunity cost refers to the money you could have made if you invested your down payment instead of locking it in a house. For example, ₹20 Lakh invested in a Nifty 50 index fund could grow significantly over 20 years, often outperforming real estate appreciation in many tier-1 cities.
How do tax benefits impact the buy vs. rent decision?
Home loans offer tax breaks: up to ₹2L deduction on interest (Sec 24b) and ₹1.5L on principal (Sec 80C). This effectively reduces your loan interest rate by 1-2%. However, this only applies if you choose the Old Tax Regime. The Rent vs Buy calculator lets you toggle these benefits to see the impact.
What is a good Price-to-Rent ratio?
The Price-to-Rent ratio compares home prices to annual rent. A ratio over 25 usually favors renting. For example, if a ₹1 Crore flat rents for ₹25,000/month (₹3L/year), the ratio is 33.3. This suggests renting is much cheaper than buying in that specific area.
Does this factor in maintenance and property tax?
Yes, homeowners must pay for maintenance, repairs, and property tax, which renters avoid. Our calculator defaults to 1.5% of property value annually for these costs, but you can adjust this based on your society charges.