Rent vs buy: the short answer
It depends, and mostly on a handful of numbers you can estimate: the property price compared with the rent for a similar home, the home loan rate, how long you plan to stay, and the growth rates you expect for rent, property prices and your investments. No calculator can tell you that one choice is better for everyone. What this one does is put both options on the same footing and show which comes out ahead on your assumptions, and by how much.
It measures money only. Owning a home also brings security, freedom to renovate and no landlord; renting brings flexibility to move. Those matter, but they are for you to weigh against the numbers.
How the calculator compares renting and buying
Imagine two households with the same savings and the same monthly budget. One buys the home; the other rents a similar home. The calculator follows both month by month and asks: at the end of the period you choose, what would each household own?
- Same starting cash. The buyer spends the down payment and purchase costs. The renter invests that same amount.
- Same monthly spending. Each month, whichever household spends less invests the difference. Usually that is the renter, because EMI plus maintenance is higher than rent, but it can be the buyer when rent is high or once the loan is repaid.
- Compare at the end. The buyer is assumed to sell the home and repay the loan; the renter holds their investments.
What the buy side includes
- Down payment and one-time purchase costs such as stamp duty, registration, legal fees and brokerage. These vary by state, so enter your own figure or estimate it with the Property Purchase Cost Calculator.
- Home loan EMI on the amount borrowed, until the loan ends. Interest is on the reducing balance, exactly as in our Home Loan EMI Calculator.
- Maintenance and recurring ownership costs such as society charges and property tax, rising once a year.
- Home value growing at your expected appreciation rate, less the outstanding loan and the cost of selling (brokerage and similar charges) at the end.
What the rent side includes
The renter pays rent, rising once a year at the rate you enter. The important part is what the renter does not spend. The down payment and purchase costs stay invested from day one, and every month in which rent is lower than the cost of owning, the gap is invested too.
This is the opportunity cost of buying: money tied up in a house cannot earn a return elsewhere. A comparison that only adds up “rent paid” against “EMIs paid” ignores it and will usually make buying look better than it is. Equally, the renter only gets this benefit if they really invest the difference, for example through a regular SIP, rather than spending it. You can see how a monthly investment builds up over time with the SIP Calculator.
The method
All calculations run monthly. For month m (1, 2, 3 …) and year index k = the number of completed years:
Rent in month m = starting rent × (1 + rent increase)^k
Owning cost in month m = EMI (while the loan runs) + maintenance × (1 + cost increase)^k + yearly ownership costs ÷ 12 × (1 + cost increase)^k
Monthly investment return = (1 + annual return)^(1/12) − 1
Each month both portfolios first earn that month's return, then the side that spent less adds the difference. The renter's portfolio starts at down payment + purchase costs; the buyer's starts at zero. After N years:
Home value = price × (1 + appreciation)^N
Buy net position = home value − outstanding loan − (home value × selling cost %) + buyer's investments
Rent net position = renter's investments
The difference (buy − rent) is positive when buying comes out ahead. The break-even year is the first year, up to 30, in which this difference is zero or more. EMI and the outstanding loan come from the standard reducing-balance formula, EMI = P × r × (1 + r)n ÷ [(1 + r)n − 1].
Worked example: an ₹80 lakh home vs ₹25,000 rent, over 10 years
These are the calculator's default inputs. They are an illustration, not a forecast for any city: property price ₹80 lakh, down payment ₹16 lakh, loan of ₹64 lakh at 8.5% for 20 years, purchase costs ₹6 lakh, maintenance ₹3,000 a month and other ownership costs ₹6,000 a year (both rising 5% a year), selling cost 1%, rent ₹25,000 a month rising 5% a year, investment return 10% a year and property appreciation 5% a year.
In the first month, owning costs ₹59,041 (EMI ₹55,541 + maintenance ₹3,000 + ₹500 towards yearly costs) against rent of ₹25,000. So the renter starts with ₹22 lakh invested and adds ₹34,041 in the first month, with the gap narrowing slowly as rent rises.
| After 10 years | Amount |
|---|---|
| Home value (₹80 lakh × 1.05^10) | ₹1,30,31,157 |
| Loan still outstanding | ₹44,79,605 |
| Cost of selling (1%) | ₹1,30,312 |
| Buy: net position | ₹84,21,241 |
| Rent: net position (renter's investments) | ₹1,16,03,934 |
| Difference (renting ahead) | ₹31,82,693 |
| Total rent paid | ₹37,73,368 |
| Total paid by the buyer (upfront, EMIs, maintenance, tax) | ₹93,93,154 |
| of which loan interest | ₹47,44,487 |
| of which loan principal repaid | ₹19,20,395 |
On these assumptions, renting and investing the difference comes out about ₹31.83 lakh ahead after 10 years, and buying does not catch up within 30 years. That is not a general verdict on buying. Change one input, the rent for the same home, from ₹25,000 to ₹40,000 and buying comes out about ₹4.47 lakh ahead after 10 years, with break-even in year 8. The comparison is very sensitive to how expensive the home is relative to its rent.
Which assumptions matter most
The sensitivity tables under the calculator change one input at a time. For the example above, the difference after 10 years (buy − rent; negative means renting is ahead) moves like this:
| Assumption changed | Range tested | Buy − rent at the low end | Buy − rent at the high end |
|---|---|---|---|
| Property appreciation | 3% to 7% | −₹54.40 lakh | −₹5.04 lakh |
| Investment return | 8% to 12% | −₹16.10 lakh | −₹50.01 lakh |
| Loan interest rate | 7.5% to 9.5% | −₹22.51 lakh | −₹41.36 lakh |
| Rent increase | 3% to 7% | −₹36.35 lakh | −₹26.84 lakh |
Property appreciation
Appreciation applies to the full price of the home, not just your down payment, because the loan is a fixed amount. Each extra percentage point compounds on the whole value, which is why it often produces the biggest swing. It is also the hardest number to predict for a single property.
Investment return
This drives the renter's side. A higher return makes renting look better; a lower one helps buying. Market returns are uneven from year to year, so a steady rate is a simplification.
Price relative to rent, and the loan rate
The gap between the monthly cost of owning and the rent decides how much the renter can invest each month. A higher loan rate widens that gap; a higher rent narrows it. Rent growth matters too, but its effect builds up more slowly.
How long you stay
Purchase and selling costs are paid once, so a longer stay spreads them over more years. Whether a longer stay helps buying overall, though, depends on the other assumptions; in the example above renting stays ahead and the gap widens with time. The holding-period table under the calculator shows this directly.
What the calculator does not include
- Tax benefits on a home loan. Under the old tax regime, interest and principal repayment on a loan for a self-occupied home may be deductible within limits; the new regime generally does not allow this. Including them would improve the buy side for people who claim them.
- Other taxes: tax on investment returns and capital gains tax when the house is sold.
- Rent deposit paid to the landlord and returned at the end.
- Moving costs, furnishing, and repeat brokerage each time a renter changes home.
- Home insurance and major repairs, unless you include them in the yearly ownership costs.
- Rental income if the buyer later lets the property out.
- Emotional and security value of owning, and the flexibility of renting.
- Changes in the loan rate over time. The calculator uses one fixed rate, while most Indian home loans are floating.
When buying tends to look better
Within this model, the buy side improves when one or more of these hold:
- The rent for a similar home is high compared with its price, so the monthly gap is small.
- You expect property prices to rise faster than you expect your investments to grow.
- Your loan rate is low, or you can make a large down payment without draining your emergency fund.
- You plan to stay long enough to spread purchase and selling costs over many years.
- You would not invest the monthly saving anyway, so the renter's advantage would not materialise.
When renting tends to look better
- The home is expensive compared with its rent, so owning costs much more each month.
- You expect your investments to grow faster than property prices.
- Loan rates are high, or purchase and selling costs are a large share of the price.
- You may move within a few years, before one-time costs can be recovered.
- You are disciplined about investing the difference every month.
Before deciding to buy, check what you can comfortably afford with the Home Affordability Calculator, and work out your total upfront cash, including stamp duty and registration, with the Property Purchase Cost Calculator.