Rent vs Buy Calculator: House Decision India

Net financial assets achieved by buying vs renting & investing over 15 years.
Year	Property Value	Loan Balance	Buying Net Worth	Renting Portfolio
1	₹84.93 L	₹61.79 L	₹23.14 L	₹28.70 L
2	₹90.17 L	₹59.39 L	₹30.78 L	₹37.46 L
3	₹95.73 L	₹56.77 L	₹38.96 L	₹47.20 L
4	₹1.02 Cr	₹53.93 L	₹47.71 L	₹58.04 L
5	₹1.08 Cr	₹50.83 L	₹57.08 L	₹70.09 L
6	₹1.15 Cr	₹47.46 L	₹67.10 L	₹83.51 L
7	₹1.22 Cr	₹43.79 L	₹77.84 L	₹98.47 L
8	₹1.29 Cr	₹39.80 L	₹89.34 L	₹1.15 Cr
9	₹1.37 Cr	₹35.45 L	₹1.02 Cr	₹1.34 Cr
10	₹1.46 Cr	₹30.72 L	₹1.15 Cr	₹1.55 Cr
11	₹1.55 Cr	₹25.57 L	₹1.29 Cr	₹1.78 Cr
12	₹1.64 Cr	₹19.96 L	₹1.44 Cr	₹2.04 Cr
13	₹1.74 Cr	₹13.86 L	₹1.60 Cr	₹2.33 Cr
14	₹1.85 Cr	₹7.23 L	₹1.78 Cr	₹2.65 Cr
15	₹1.96 Cr	₹0	₹1.96 Cr	₹3.02 Cr

What Is the Rent vs Buy Decision?

The Rent vs Buy decision evaluates whether purchasing a residential property creates higher long-term net wealth than renting a home and investing the cost difference into high-yielding equity SIPs.

In Indian metropolitan cities, rental yields are low (typically 2.5% to 3.5%), while home loan interest rates average 8.4% to 9.0%. This creates a significant monthly cash flow difference between renting and paying an EMI for an equivalent home.

This calculator models the exact compounding dynamics of both options: home price appreciation, loan principal paydown, annual rent escalation, and the opportunity cost of investing the down payment and monthly savings into mutual funds.

Evaluating property yield or loan options? Use the Rental Yield Calculator or project SIP mutual fund growth with the SIP Calculator.

Rent vs Buy Mathematical Model

The mathematical model tracks two parallel balance sheets across N years.

Scenario A: Buying a House

Buy Net Worth = Property Price × (1+g)^n - Outstanding Loan Balance

Scenario B: Renting & Investing Savings

Initial Investment = Down Payment + Stamp Duty
Monthly SIP = (Monthly EMI + Maintenance) - Monthly Rent
Rent Portfolio = Future Value of Initial Investment + Future Value of Monthly SIPs

Worked Example: Rs 80 Lakh Property vs Rs 25,000 Rent (15 Years)

Assume a Rs 80 lakh property (Rs 16 lakh down payment + Rs 4.8 lakh stamp duty), 8.5% loan rate, 6% property CAGR vs Rs 25,000 rent (5% annual escalation) and 12% equity SIP return.

•Upfront cash invested by tenant: Rs 20.8 lakh grows at 12% for 15 years → Rs 1.13 Crore

•Monthly savings invested in SIP: difference between EMI (Rs 62,300) and rent grows into an additional Rs 75+ Lakh corpus

•Buyer property value after 15 years: Rs 80 lakh at 6% CAGR → Rs 1.91 Crore (Net Worth ~Rs 1.62 Cr after loan balance)

Opportunity Cost of Down Payment

Locking Rs 20 lakh into a property down payment deprives you of 12% compounding in equity markets. Over 15 years, Rs 20 lakh invested at 12% CAGR grows to over Rs 1.09 crore. This opportunity cost is the primary reason renting often outperforms buying in low rental-yield Indian markets.

Year-by-Year Wealth Schedule

The table above details how buying net worth starts lower due to stamp duty and loan interest upfront, but catches up over time as the home loan balance is paid off.

Rental Yield Impact on the Decision

Rental yield (Annual Rent ÷ Property Value) dictates whether renting or buying wins.

Impact of rental yield on financial winner over 15 years.
Rental Yield %	Monthly Rent on Rs 80L Property	Financial Winner
2.5%	Rs 16,667	Renting & SIP Wins Significantly
3.5%	Rs 23,333	Renting & SIP Wins Moderately
5.0%	Rs 33,333	Break-even / Buying Competitive
7.0%+	Rs 46,667	Buying Wins Clearly

Tax Impact: Section 24(b) vs HRA Exemption

Tax benefits can tilt the math under the Old Tax Regime.

•Buying Tax Deduction: Section 24(b) allows up to Rs 2 lakh deduction on home loan interest, saving up to Rs 62,400 annually for 30% slab taxpayers.

•Renting HRA Exemption: HRA exemption under Section 10(13A) can save Rs 50,000 to Rs 1.5 lakh annually depending on basic salary and rent paid.

Rent vs Buy Formula in Excel

Model rent vs buy wealth comparison in Excel using FV and PMT functions.

A1: Down Payment | B1: Monthly EMI | C1: Monthly Rent | D1: SIP Rate | E1: Yrs=FV(D1/12, E1*12, -(B1-C1), -A1)

Common Mistakes in Rent vs Buy Analysis

•Assuming rent is thrown-away money: ignoring that home loan interest in the early years is also a unrecoverable cost paid to the bank.

•Failing to actually invest the rent savings: renting only wins if you disciplinedly invest the monthly savings gap into equity SIPs.

How to Make Your Decision

Check tenure horizon: if living in the city under 7 years, renting almost always wins due to high transaction friction costs.
Evaluate local rental yield: if yield is under 3%, renting & SIP is mathematically stronger.
Factor emotional security: home ownership offers stability, landlord independence, and emotional peace that math cannot quantify.

How to Use This Calculator

Enter property price and rent: input target property valuation and current rent for similar homes.
Set growth and return rates: set property CAGR % and mutual fund SIP return %.
Review net wealth difference: compare buying net worth against renting investment portfolio over your time horizon.

Frequently Asked Questions

How does a rent vs buy calculator work?

A rent vs buy calculator compares the financial net worth achieved over N years by buying a property (down payment, EMI, property appreciation, maintenance) against renting (monthly rent, 5% annual escalation, investing the down payment and monthly EMI savings in mutual funds).

When is renting financially better than buying a house in India?

Renting is often financially superior when rental yields are low (2% to 3.5%) and expected equity SIP returns (11% to 13%) significantly outpace property appreciation (5% to 7%) over a 10 to 15 year horizon.

When is buying a house better than renting?

Buying wins when you plan to stay in the property long-term (15+ years), when property appreciation matches or exceeds loan rates, or when emotional stability and inflation-hedged housing security outweigh pure investment arbitrage.

What is the opportunity cost of down payment?

The opportunity cost is the compounding return you give up by locking cash into a home down payment instead of investing it in higher-yielding assets like equity mutual funds.

How does rent escalation impact the decision?

Rent in Indian tier-1 cities typically escalates by 5% to 10% annually or every 11 months, gradually reducing the monthly savings gap between renting and a fixed home loan EMI.

How do tax benefits under Section 24(b) and 80C affect buying?

Home loan interest deduction up to Rs 2 lakh under Section 24(b) (old regime) reduces effective borrowing cost, boosting the net financial return of buying for high-tax-bracket buyers.

Does HRA tax exemption favor renting?

Yes. Salaried employees under the old tax regime can claim HRA tax exemption on rent paid, lowering effective rental cost and making renting more attractive.

What annual property appreciation rate is realistic in Indian metro cities?

Historical real estate price CAGR in top Indian metros (Mumbai, Bengaluru, NCR, Pune) has averaged between 5% and 8% per annum over 10-year rolling periods.

What investment return rate should be used for rent savings?

A conservative estimate of 11% to 12% CAGR is standard for diversified Nifty 50 or broad-market equity mutual fund SIPs over a 10+ year investment horizon.

Is property maintenance included in the buy calculation?

Yes. Annual maintenance, society charges, property tax, and repairs are estimated at 0.5% to 1.0% of the property value per year.

What is Fermor?

Fermor is a financial platform for India. Every calculator is free to use, and a free account is available to save your results and access them later. Fermor is building an automated financial action system using the Account Aggregator framework to connect real accounts and close the gap between knowing what to do with your money and actually doing it.

Disclaimer: All figures on this page are indicative estimates based on user inputs and assumed growth rates. Real estate price growth and mutual fund returns are subject to market risks and cannot be guaranteed. This tool is for educational purposes only and does not constitute financial or real estate advice. Consult your financial adviser before making housing decisions.