Buy vs Rent Calculator
Should you buy a home or rent one and invest the difference? This tool assumes both people have the same cash, so the renter invests every rupee the buyer sinks into the house — then compares net worth after your chosen horizon.
Buy vs rent, settled with net worth
"Rent is money down the drain" is the oldest line in Indian personal finance — and it is only half true. Renting frees up a large pile of cash (the down payment) plus, in the early years, a chunk of every EMI. If a renter disciplinedly invests that difference, the question stops being emotional and becomes arithmetic: after your chosen horizon, whose net worth is bigger — the owner of an appreciating home, or the holder of a growing investment portfolio?
This calculator answers exactly that. It assumes the buyer and the renter start with the same cash. The buyer pays the down payment and takes a home loan; the renter invests that down payment on day one and then, every month, invests whatever the buyer spends on EMI above that month's rent. We then tally each person's net worth at the horizon and declare a winner.
How the model works
- Buyer's side — the loan EMI uses the standard reducing-balance formula (the same one in our Home Loan Calculator). We amortise the loan month by month, so we know exactly how much you still owe at the horizon. The home grows at your appreciation rate, and buyer net worth = home value − outstanding loan.
- Renter's side — the portfolio starts with the down payment and compounds monthly at your investment return. Each month it also receives max(0, EMI − rent), because in the early years the EMI is larger than rent, so the renter has a surplus to invest. Rent itself rises every year by your rent-hike rate.
- The verdict — we compare the buyer's net worth against the renter's portfolio. Whoever's number is bigger wins, and the headline shows the gap between them.
A worked example
Take an ₹80,00,000 home with a ₹16,00,000 down payment, a 20-year loan at 8.5%, and rent of ₹25,000 rising 7% a year. Assume the portfolio earns 11% and the home appreciates 5%. Here is where each person stands at year 10:
| At year 10 | Buyer | Renter-investor |
|---|---|---|
| Asset value | Home ≈ ₹1,30,31,000 | Portfolio ≈ ₹97,80,000 |
| Liability | Loan owed ≈ ₹44,80,000 | None |
| Net worth | ≈ ₹85,52,000 | ≈ ₹97,80,000 |
Here the renter is ahead by roughly ₹12,28,000 — mainly because an 11% return comfortably beats 5% appreciation, and the loan is only half repaid at year 10, so a big liability still drags on the buyer's net worth. Push appreciation higher or stretch the horizon and the picture reverses.
What tips the balance
The result swings on three sliders more than any other. The table below shows the direction each one pushes the verdict:
| Lever | Favours buying when… | Favours renting when… |
|---|---|---|
| Home appreciation vs investment return | Appreciation is close to or above returns | Returns clearly beat appreciation |
| Rent level & hikes | Rent is high and climbing fast | Rent is cheap relative to EMI |
| Horizon | You stay 10+ years and repay the loan | You may move within a few years |
The break-even is the horizon at which the two net-worth lines cross. Buying tends to win the longer you stay, because the loan eventually disappears and you own an unleveraged asset, while the renter keeps paying ever-rising rent. Renting tends to win over shorter horizons and whenever equity-like returns decisively outpace property.
How to use this calculator
Work through the sliders top to bottom and be honest with every input — the verdict is only as reliable as your assumptions:
- Set the home price and down payment to a deal you could realistically fund; the loan amount is simply the difference, and the EMI follows from your rate and tenure.
- Enter the rent you'd pay for an equivalent home today, not a cheaper or nicer one — an apples-to-apples comparison is the whole point.
- Keep the investment return defensible. Use a rate you would actually earn after tax and fees, not a best-case equity number, then stress-test it a couple of points lower.
- Match the horizon to how long you'll stay put. Short stays punish buyers; decade-plus stays reward them.
Then read the headline: it names the winner and the rupee gap between the two net worths. Slide one assumption at a time to find your personal break-even — the point where the verdict flips.
What this model leaves out (read this)
- Transaction costs — stamp duty and registration add roughly 6–7% of the price on the way in, and brokerage plus capital-gains tax bite on the way out. These are real and one-sided against buying, so buying's true edge is smaller than shown.
- Ownership costs — maintenance, society dues, property tax and repairs typically run about 0.5–1% of the home's value each year.
- Liquidity & flexibility — a portfolio can be sold in a day; a house cannot, and it ties you to one location.
- Risk — the investment return is not guaranteed. Equities are volatile, while a home you live in delivers a roof and a psychological security no spreadsheet prices in.
- Tax — home-loan interest and principal deductions (old regime) can lower your effective cost; if you rent and also draw HRA, estimate that with the HRA Exemption Calculator.
Before you commit either way, sanity-check the loan you'd actually qualify for with the Home Loan Eligibility Calculator, and model the renter's investing plan with the SIP Calculator. Treat this tool as a decision framework, not a prophecy — its answer is only as good as the return and appreciation numbers you feed it.