Buying beats renting when the flat gains more in value each year than owning costs over and above the rent. For a ₹1.1 crore flat that rents for ₹35,000 a month, that takes price growth of about 5.9% a year over ten years, if the money could otherwise earn an assumed 8% a year.
What does owning a home cost each year?
The home loan EMI is not the cost of owning: the part that repays principal stays yours as the flat. The real yearly cost has three parts: the interest, the return the down payment would have earned invested, and upkeep and property tax. On top comes a one-time cost, the stamp duty and registration. Rent, by contrast, is the whole cost.
Deepa's ₹1.1 crore flat against ₹35,000 rent: year one
Deepa earns a ₹36 lakh CTC, about ₹2,10,000 a month in hand on the structure in CTC vs in hand salary. She pays ₹35,000 a month, ₹4,20,000 a year, for a flat that would cost ₹1.1 crore to buy.
RBI caps a home loan above ₹75 lakh at 75% of the property's value, so her down payment is at least ₹27,50,000 and the loan ₹82,50,000. Over 20 years at an assumed 8.5%, the EMI is ₹71,595, about 34% of her in-hand pay. In 2026 lenders charged from about 7.25% for strong credit scores to 10% or more for weaker ones.
Her first year of owning costs about ₹6,95,000 of interest (the other ₹1,64,200 of her EMIs repays principal), ₹2,20,000 of return the ₹27,50,000 would earn at an assumed 8%, and an assumed ₹60,000 for society maintenance, repairs, insurance and property tax. That is about ₹9,75,000, against ₹4,20,000 of rent.
Owning comes out level in year one only if the flat gains about ₹5,55,000, or 5.0% of its price. At zero price growth, rent would have to be about ₹81,200 a month.
Stamp duty and registration, an assumed ₹7,00,000 here (about 6.4%; rates vary by state, and some states charge women buyers less), are paid on top. The net worth after buying a flat post shows why they come straight off net worth on day one.
What price growth makes buying equal over 10 years?
Ten years is fairer than one, because rent rises while the EMI, at the assumed 8.5%, stays the same. If she buys, Deepa pays the EMI and upkeep. If she rents, she invests the ₹27,50,000 and the ₹7,00,000 of stamp duty and registration on day one, then each month's gap between those outgoings and her rent. Rent and upkeep rise an assumed 5% a year, investments earn an assumed 8% a year, and nothing is sold, so tax on gains is left out of both.
After ten years she would still owe about ₹57,74,500 on the loan, while the renter's investments reach about ₹1,37,54,000. The flat must be worth about ₹1,95,28,500 to match: 5.9% a year. At 5% a year owning is about ₹16.1 lakh behind; at 7%, about ₹21.1 lakh ahead.
The price to rent ratio, the price divided by a year's rent, sets that break-even. Deepa's is 26.2, a rental yield of 3.8%; the lower the ratio, the less growth owning needs.
| Starting rent a month | Price to rent ratio | Rental yield | Price growth a year to break even |
|---|---|---|---|
| ₹25,000 | 36.7 | 2.7% | 7.0% |
| ₹30,000 | 30.6 | 3.3% | 6.5% |
| ₹35,000 | 26.2 | 3.8% | 5.9% |
| ₹45,000 | 20.4 | 4.9% | 4.7% |
| ₹55,000 | 16.7 | 6.0% | 3.2% |
For comparison, RBI's all-India house price index across 18 cities rose 3.6% in the year to Q1 2026-27, below the 5.9% Deepa's flat needs; its year-on-year growth ranged from 2.2% to 7.6% across the quarters since April 2024. One property consultant put rental yields in large markets at about 3.2% to 4.6% in Q2 2026. If rents rise 8% a year instead of 5%, the break-even falls to 5.3%; if investments earn 10% instead of 8%, it rises to 7.1%.
Does tax change the rent vs buy answer?
In the new regime, the default for FY 2026-27, it does not: a renter gets no HRA exemption and an owner no deduction for interest on a self-occupied home. In the old regime, section 24(b) of the 1961 Act allows up to ₹2,00,000 of that interest a year, worth ₹62,400 to Deepa at 31.2%, and a renter claims HRA under section 10(13A) of the same Act; the Income-tax Act, 2025 carries both forward under new numbers. Principal also counts, once the flat is complete, within the ₹1,50,000 limit of section 80C of the 1961 Act (section 123 of the 2025 Act), which her own PF already fills. These help only if the old regime wins for her overall.
When does buying make sense even if renting wins on paper?
Buying can still suit Deepa when renting wins on paper if she wants to stop moving, to change the flat as she likes, and expects to stay well beyond ten years. It is safer only if six months of essential expenses, EMI included (nine to twelve for the only earner in a household with dependants), stay in an emergency fund after the ₹34,50,000 upfront. For an under-construction flat, rent alongside the EMI changes the sums, as pre-EMI vs full EMI shows. Once she owns, prepay home loan or invest tests where spare money should go.
Dhi shows a home loan or a rent payment next to your cash flow, net worth, protection and goals, and answers what buying would change from your own numbers. Dhi maps your investments to your goals, takes no commissions and never mis-sells.
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This is general information for salaried individuals in India, not personalised financial advice.
