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Rent vs buy calculator

Written and reviewed by Omm · Last reviewed · General information, not investment advice

Is it cheaper to buy a home or to keep renting and invest the money? Enter the home price, your loan and the rent you pay today. The calculator compares what you would own after the years you choose, and shows the rent at which buying would break even.

Between 100000 and 1000000000

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Between 0 and 100

Between 0 and 5000000

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Between 1 and 40

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Between 0 and 20

years

Between 1 and 30

More assumptions
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Between 0 and 20

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Between -10 and 20

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Between 0 and 30

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Between 0 and 15

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Between 0 and 5

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Over 15 years, renting and investing the difference leaves you ₹73,24,692 ahead of buying.

If you buy: what you own after 15 years

₹1,86,59,491

If you rent: what you own after 15 years

₹2,59,84,183

Monthly EMI

₹70,697

Cash needed on day one

₹26,00,000

Yearly rent as % of price

3.00%

Rent at which buying breaks even

₹39,861 a month

Buying does not catch up with renting within 15 years. Home price after 15 years: ₹2,39,65,582; loan still owed then: ₹34,25,695.

Year 1Year 15
If you buyIf you rent
Year-by-year breakdown
YearIf you buyIf you rent
1₹26,48,459₹34,50,839
2₹33,81,174₹43,66,876
3₹41,49,047₹53,54,191
4₹49,68,711₹64,19,456
5₹58,43,793₹75,69,983
6₹67,78,188₹88,13,797
7₹77,76,073₹1,01,59,701
8₹88,41,936₹1,16,17,353
9₹99,80,592₹1,31,97,354
10₹1,11,97,215₹1,49,11,334
11₹1,24,97,362₹1,67,72,064
12₹1,38,87,004₹1,87,93,558
13₹1,53,72,555₹2,09,91,204
14₹1,69,60,913₹2,33,81,895
15₹1,86,59,491₹2,59,84,183

How it works

Buyer = home value × (1 − selling cost) − loan left − tax on gain + savings; Renter = investments − tax on gain. Each month, whoever pays less (EMI + upkeep, or rent) invests the difference.

The comparison is fair because both people spend exactly the same money. On day one the buyer pays the down payment and the stamp duty and registration, and the renter invests that same amount. Every month the buyer pays the EMI plus maintenance and property tax, and the renter pays rent. Whoever pays less invests the difference, so the total spent is always equal.

At the end the buyer sells the home, pays the selling costs and the tax on the gain, and repays any loan still left. The renter cashes in the investments and pays the tax on their gain. The two final amounts are what each person owns, and the difference is the answer.

The EMI uses the standard formula with the yearly loan rate divided by 12. The home price and the investments grow at yearly rates, and rent rises once a year. If you stay longer than the loan tenure, the EMI stops when the loan ends. Interest deductions on a home loan are not included, so the result is a little pessimistic for a buyer who can claim them.

Rent at which buying breaks even is found by re-running the comparison with different starting rents until the two results are level. If the rent you pay is above it, buying comes out ahead on these assumptions; below it, renting does. Yearly rent as a percentage of the price (the rental yield) is the number that moves this answer most.

Everything depends on the assumptions. Change the home price growth, the investment return and the number of years to see how sensitive the result is. It is a projection from the numbers you enter, not a forecast, and it cannot value things like stability, freedom to move, or the risk of having most of your money in one property.

Example. A ₹1,00,00,000 home with 20% down and a 20-year loan at 8.75% has an EMI of about ₹70,697. A similar home rents for ₹25,000 a month (a 3% yearly yield), rising 5% a year. If prices grow 6% a year and investments return 10%, then after 15 years the buyer owns about ₹1,86,59,491 and the renter about ₹2,59,84,183, so renting comes out ahead on these assumptions.

Read the guide: Rent vs buy a house in India: how to decide.

Frequently asked questions

Is it better to rent or buy a house in India?

There is no answer that fits everyone. Buying tends to win when rent is high compared with the price, when the home’s price grows faster than your investments would, and when you stay for many years. Renting tends to win when the rent is a small share of the price, as it often is in Indian cities, and when you would invest the saved money well. Enter your own numbers to see which side your situation falls on.

What is rental yield and why does it matter?

Rental yield is the yearly rent divided by the price of the home. A low yield means you pay a lot to own a home compared with what it would cost to rent, so buying needs strong price growth to catch up. The calculator shows your yield and the monthly rent at which buying would break even.

Why do you add the money the renter saves to investments?

Because a fair comparison needs both people to spend the same. A buyer usually pays more each month in EMI and upkeep than a tenant pays in rent, and also puts money down on day one. The tenant can invest that money. Ignoring it makes buying look better than it is.

Does this include the tax benefit on a home loan?

No. Deductions on home loan interest and principal depend on your tax regime, the limits that apply and whether the home is let out, so they are left out. They would improve the buyer’s result somewhat if you can claim them.

What tax rate should I enter on gains?

The default of 12.5% is the long-term capital gains rate that applied to property and listed equity funds when this page was written. Exemptions, the rules for homes bought long ago and changes to the law are not modelled, so check the current rules, or set the rate to 0 to see the result before tax.

What home price growth and investment return should I assume?

Use cautious numbers and test a few. Home prices in your area, not the country as a whole, are what matter, and past growth does not guarantee future growth. Investment returns are not guaranteed either; equity returns vary from year to year and can be negative. The default values are only examples.

What does this calculator not include?

Home loan interest deductions, the equity gains tax exemption, rent that you receive if you let the home out, a loan prepayment plan, changes in your income, brokerage when you rent, and non-money factors such as security, freedom to move and having your money in a single property. Treat the result as one input to the decision.

What is the price-to-rent ratio?

It is the price of a home divided by one year’s rent for the same home. A flat that costs ₹1 crore and rents for ₹25,000 a month has a ratio of about 33. It is the rental yield turned upside down: a ratio of 33 is a yield of 3%. The higher the ratio, the more buying costs compared with renting.

How long do I need to stay for buying to make sense?

Long enough to spread the one-time costs of buying and selling over many years. The calculator shows the first year in which the buyer is ahead and stays ahead; if you expect to move before that year, renting comes out better on your figures.

Sources

Rules, rates and definitions on this page come from these official sources. Check the current position there before you decide.

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