Money Basics · Big purchases

Rent vs buy

Every Indian middle-class family tells you: buy a house, it's an investment. Most of the time, the math disagrees.

The real cost of buying

A ₹60 lakh flat in Pune. 20% down payment (₹12 lakh) + home loan of ₹48 lakh at 7.5% for 20 years.

• EMI: ~₹38,700/month
• Total paid over 20 years: ₹1.05 crore (₹12L down + ₹93L in EMIs, of which ₹45L is interest)
• Property taxes, maintenance, repairs: ₹10,000/year ongoing
• Stamp duty + registration: ₹3–5 lakh one-time

The opportunity cost

The ₹12 lakh down payment invested in Nifty 50 index fund at 12% for 20 years = ₹1.16 crore.

The monthly EMI difference (EMI minus rent) invested at 12% = significant additional corpus.

> If a flat rents for ₹15,000 and its EMI is ₹42,000, the ₹27,000 monthly difference invested at 12% for 20 years = ₹2.7 crore.

When buying makes sense

• Price-to-rent ratio below 20: if a ₹60L flat rents for ₹30,000+/month (P/R = 16.7), closer to buy
• You plan to live there 10+ years: transaction costs (stamp duty, brokerage) only make sense with a long horizon
• Emotional value: stability, no evictions, renovation freedom, real but unquantifiable
• EMI + maintenance is lower than rent in your city (rare but possible in smaller cities)

Price-to-rent ratioAnnual property price ÷ Annual rent. Below 20 = buying makes more sense.

The honest conclusion

In most Indian metros, renting and investing the difference beats buying, financially, for most young people. Buy when you're emotionally ready, financially stable, and plan to stay long-term, not because of the 'investment' narrative.

Takeaway. Buying is often more expensive than renting when you account for opportunity cost of down payment and EMI differential. Rent and invest the difference until you truly need to own.