What is a Rent vs Buy calculator?
The rent-vs-buy calculator compares the net-worth outcome of two paths over the same horizon:
- Buy: take a home loan, pay EMI + maintenance + property tax, own the asset at the end.
- Rent: invest the down payment, invest the monthly EMI-rent surplus, pay rent that grows each year.
The winner is whoever has more net worth at the end of the comparison horizon.
Why Indian rent/buy math is different from the US
In most US rent-vs-buy calculators, the default assumption is that buying wins over 7+ year horizons. In India:
- Rental yield is low. Indian rent is typically 2–3% of property value. US is 5–8%. Lower rent relative to property price favours renting.
- Property appreciation has slowed. Indian real estate has averaged ~5–7% CAGR over the last decade, not the 10–12% of earlier eras.
- Loan rates are high. 8.5% home loan rate (even after tax benefit) vs. 3–4% in the US pre-2022.
- Maintenance is significant. Society charges + property tax + repairs = 1–1.5% of property value per year.
- Transaction costs are brutal. Stamp duty + registration (5–7% of property value) on entry. 2–3% agent fee on exit. These dominate short horizons.
Net effect: renting often wins mathematically in Indian metros for horizons under 10–15 years — particularly in high-rent, high-appreciation markets like Bangalore and Mumbai.
But math isn't everything
Owning a home delivers:
- Forced savings. The EMI is non-negotiable; the invested alternative requires monthly discipline most people don't sustain.
- Stability. No landlord evicting you for a sale, no rent negotiations every 11 months.
- Customization. Renovate, paint, nail the wall — without permission.
- Emotional anchor. Particularly for families with children in specific schools.
Financial optimality isn't the only goal. The calculator gives you the financial answer; you add the emotional weight.
Default assumptions
| Variable | Default | Rationale |
|---|---|---|
| Equity return | 11% | Indian equity over 15+ year horizons |
| Property appreciation | 6% | Realistic 2026 Indian metro long-run |
| Rent growth | 7% | Typical urban India |
| Maintenance | 1% | Society + property tax + minor repairs |
| Down payment | 20% | RBI min-LTV floor |
| Loan rate | 8.5% | 2026 typical Indian home loan |
Adjust to your specific situation.
How the math works
Buy path
- Pay EMI monthly for the horizon (or until loan end).
- Property appreciates at the given rate.
- Maintenance cost accumulates.
- Net worth at end = final property value − remaining loan balance − maintenance paid.
Rent path
- Invest down payment at equity return rate.
- Each month: roll forward portfolio, add any surplus (EMI minus rent).
- Rent grows annually at the given rate.
- Net worth at end = invested portfolio value.
The difference in final net worth is the verdict. Positive = buying wins; negative = renting wins.
Caveats
- Transaction costs (stamp duty, registration, broker) not modelled. Add 6–8% to the buy side for entry costs; this typically tips short-horizon comparisons further toward renting.
- Tax benefits not modelled. Section 24(b) ₹2 L interest deduction + 80C ₹1.5 L principal deduction are significant early in the loan. On rent, HRA exemption works in your favour. Both add complexity.
- Liquidity premium. Renting keeps your cash liquid. If you need ₹20 L in an emergency, selling a home takes months; redeeming MFs takes 1 day. The calculator doesn't model this.
- Lifestyle flexibility. Renting lets you move cities easily. Buying locks you in.
When renting typically wins in India
- Horizons under 7 years
- Bangalore, Mumbai, Delhi-NCR (low rent-to-price ratio)
- Early-career professionals with career mobility
- Already-high equity exposure; diversification value of property is low
When buying typically wins in India
- Horizons over 15 years
- Tier-2/Tier-3 cities (higher rent-to-price ratio, usually better deal)
- Families with school-age children
- Those at peak tax bracket (Section 24(b) maxes out the benefit)
Run the numbers above. The output is a single number, but the decision is yours.
