Rent vs Buy Calculator
Compares your net worth after N years if you buy against if you rent and invest the difference — the only comparison that actually answers the question.
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"Rent is money down the drain" is the most repeated and least examined claim in Indian personal finance. The honest test is not whether you own something at the end — it is which choice leaves you with more money.
The comparison that actually works
Both sides must be measured the same way: net worth after N years.
- If you buy, your net worth is the property's value minus what you still owe.
- If you rent, your net worth is what your invested money grew to — the down payment you never spent, plus every month's difference between the EMI and the rent.
Anything less than this is not a comparison. Counting the house but ignoring what the down payment would have earned stacks the deck; counting rent as "wasted" while ignoring interest paid stacks it the other way.
A worked case
An ₹80,00,000 flat, 20% down, 8.75% over 20 years. A similar flat rents for ₹25,000 a month. Assume 5% property appreciation, 7% annual rent increases, and 12% on invested money. After 10 years:
| EMI | ₹56,557 |
| Property value at year 10 | ₹1,30,31,157 |
| Net worth if you buy (value − outstanding) | ₹85,18,355 |
| Net worth if you rent and invest | ₹1,09,07,784 |
Renting and investing is ahead by roughly ₹23.9 lakh.
The reason is the rent-to-price ratio. ₹25,000 a month on an ₹80 lakh flat is a gross yield of 3.75% — typical for Indian metros and very low by global standards. The buyer is paying 8.75% to hold an asset appreciating at 5%, while the renter pays 3.75% of the asset's value annually and invests the rest at 12%.
Change the assumptions and the answer flips
This result is not a law of nature. It is sensitive to four numbers:
- Property appreciation. At 9% instead of 5%, buying wins comfortably.
- Investment return. At 8% instead of 12%, buying wins.
- Rent-to-price ratio. In a city where the same flat rents for ₹45,000, buying wins.
- How long you stay. The buyer's transaction costs — stamp duty, registration, brokerage — are paid up front and amortise over time. Under five years, buying almost never wins.
Run your own numbers. Anyone quoting a universal answer is selling something.
What this model leaves out
Deliberately, so you can add them yourself:
- Stamp duty, registration and brokerage — commonly 6–8% of the price, paid on day one, and a real cost to the buyer that this model ignores.
- Maintenance and property tax — society charges, repairs and municipal tax, typically 0.5–1% of value a year, also on the buyer.
- Home loan tax benefits, which reduce the buyer's effective rate under the old regime.
- Rental insecurity — being asked to move, deposits, and the cost and disruption of shifting.
The first two favour renting and the third favours buying, so they partly offset. The fourth is not financial and is often the actual reason people buy, which is a perfectly good reason as long as it is named honestly rather than dressed up as an investment case.
Rent vs Buy — frequently asked questions
Is renting really cheaper than buying in India?
Often, on the numbers, in metro cities. On an ₹80,00,000 flat with 20% down at 8.75%, against ₹25,000 rent, 5% appreciation and 12% investment returns, renting and investing the difference is about ₹23.9 lakh ahead after 10 years. The driver is the rent-to-price ratio: ₹25,000 on ₹80 lakh is a 3.75% gross yield, so the buyer pays 8.75% to hold an asset appreciating at 5%.
What is the right way to compare renting and buying?
Compare net worth after N years, measured the same way on both sides. The buyer’s net worth is property value minus outstanding loan. The renter’s is the invested down payment plus every month’s difference between EMI and rent, compounded. Counting the house but ignoring what the down payment would have earned is not a comparison.
When does buying win?
When property appreciation is high (9% rather than 5% flips it), when investment returns are modest (8% rather than 12% flips it), when the rent-to-price ratio is high — a city where the same flat rents for ₹45,000 rather than ₹25,000 — and when you stay long enough to amortise the upfront costs. Under five years, buying almost never wins.
Does this include stamp duty and maintenance?
No, deliberately. Stamp duty, registration and brokerage typically total 6–8% of the price and are paid on day one; maintenance and property tax run about 0.5–1% of value a year. Both fall on the buyer and both make the buying case worse than shown. Home loan tax benefits under the old regime push the other way and partly offset them.
What return should I assume on invested money?
12% is a common assumption for Indian equity over long horizons and is broadly consistent with long-run Nifty total returns, but it is an assumption rather than a promise. Run the comparison at 10% and 8% as well. If renting only wins at 12%, the case is weaker than it looks — and the same discipline applies to the property appreciation figure.
Should I buy for reasons other than money?
Yes, and it is a perfectly good reason — security of tenure, not being asked to move, freedom to renovate, and being close to family matter to most people and do not appear in any spreadsheet. The honest approach is to name that as the reason rather than dressing it up as an investment case. Knowing you are paying a premium for stability is different from believing you are making money.
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Results from this calculator are estimates for informational use only — not financial, medical, or professional advice. Read our full disclaimer before acting on any number you see here.