Rent vs buy
Whether buying beats renting depends on how long you stay, how fast the home's value grows and what your savings would earn instead. On an ₹80 lakh home that rents for ₹25,000 a month, staying 10 years with the home and rent each rising 5% a year and savings earning 7%, renting comes out about ₹8.76 lakh ahead.
Change assumptions
Also counted: Pune's 7% stamp duty and the registration fee when you buy, and upkeep of 0.5% of the home's value a year.
- After 10 years, renting leaves you better off by
- ₹8.76 lakh
- If you buy: the home is worth
- ₹1.3 crore
- minus the loan still owed
- ₹44.8 lakh
- If you rent: your savings grow to
- ₹94.28 lakh
How it is worked out
Both sides spend the same money each month. If you buy, you pay the down payment, 7% stamp duty and the registration fee, the EMIs and upkeep; at the end you own the home's value minus the loan still owed. If you rent, you invest the down payment and stamp duty instead, then each month invest what buying would have cost you more than the rent (or draw on your savings when rent costs more). At the end you compare what each leaves you with.
Worked example: ₹80 lakh home, 20% down, a loan at 8.5% over 20 years (EMI ₹55,541), rent ₹25,000, 10 years. The home grows to ₹1.3 crore with ₹44.8 lakh still owed; the renter's savings grow to ₹94.28 lakh.
The result moves a lot with the assumptions: change them to your own. It leaves out tax breaks on home loans, the cost of moving house, and the comfort of owning.
Questions
- Is it better to rent or buy in Pune?
- It depends on how long you stay and on the assumptions: the longer you stay and the faster prices rise, the better buying looks. Put in your own numbers; the calculator shows what each choice leaves you with.
- What does the rent vs buy calculator leave out?
- Tax benefits on home loan interest and principal, moving costs, and anything you value about owning or renting that is not money.
- Why does the down payment count for renting too?
- Because a renter keeps that money: the calculator assumes it is invested, so both choices start from the same savings.