planning
Rent vs Buy a House in India: Which Leaves You Richer?
By Himanshu Kumar Gupta · · 6 min read
For a ₹1 crore home with a ₹20 lakh down payment, buying wins only if the house grows faster than about 6.4% a year over 20 years. That assumes the renter invests the down payment and the EMI-minus-rent gap at 10% a year.
The setup
- Buyer: pays ₹20 lakh down and takes an ₹80 lakh loan at 8.5% for 20 years. The EMI is ₹69,426. After 20 years the buyer owns the house outright.
- Renter: pays ₹28,000 a month in rent, rising 5% a year. They invest the ₹20 lakh on day one. Each month they also invest the gap between the EMI and their rent.
Both spend the same amount every month. The only question is what each owns at the end.
What the renter has after 20 years
| Return on renter's investments | Renter's portfolio | House growth needed to match |
|---|---|---|
| 8% | ₹2.56 crore | 4.8% a year |
| 10% | ₹3.48 crore | 6.4% a year |
| 12% | ₹4.73 crore | 8.1% a year |
At 10%, the renter ends with about ₹3.48 crore. For the buyer to match it, the ₹1 crore house must be worth that much after 20 years. That means growing 6.4% a year.
By year 20, rent has risen to about ₹70,755 a month. That is close to the EMI, so the renter's monthly saving shrinks over time.
A quick check: EMI versus rent
In this example the EMI is 2.5 times the starting rent. That gap is what the renter gets to invest each month. The wider the gap between EMI and rent in your city, the stronger the case for renting. The faster rents rise, the more the gap closes.
The buyer's side in numbers
Over 20 years the buyer pays ₹1.87 crore in all: ₹20 lakh down and ₹1.67 crore in EMIs. Of that, ₹86.6 lakh is interest. If the house grows 5% a year, it is worth about ₹2.65 crore at the end. That is less than the renter's ₹3.48 crore at 10% returns, but more than the renter's ₹2.56 crore at 8%.
What this leaves out
- Stamp duty, registration and brokerage add to the buyer's cost on day one.
- Maintenance and property tax add to the buyer's yearly cost.
- Tax benefits on home loan interest and principal help the buyer, but only in the old regime.
- Discipline. The renter wins only if they actually invest the difference every month.
The first two favour renting. The last two can favour buying.
Beyond the numbers
A home gives stability. You cannot be asked to move, and you can change it as you like. Renting gives flexibility for job moves and keeps your money liquid. The longer you stay in one home, the more the one-time costs of buying are spread out. If you may move cities in a few years, renting is usually simpler.
Check your city's numbers
Compare the cash outflow in the rent vs buy calculator. Work out the EMI in the home loan EMI calculator. If you decide to buy, plan the down payment with the down payment calculator.
Frequently asked questions
- Is it better to rent or buy a house in India?
- It depends on how fast the house grows versus your investments. In our example, buying wins only if the house grows over 6.4% a year when investments earn 10%.
- What is a good rent to price ratio for buying?
- In our example, a ₹1 crore home rents for ₹28,000 a month, about 3.4% of its price a year. The lower this yield, the stronger the case for renting.