Rent vs. Buy Calculator

The 5% rule is a simple decision tool: If annual rent is less than 5% of the property price, renting is financially better. If it's more than 5%, buying may be the smarter choice. Example: A house costing ₹50 lakhs would have a 5% threshold of ₹2.5 lakhs/year (₹20,833/month). If the actual rent is ₹18,000/month, renting wins; if it's ₹25,000/month, buying wins. This is a simplified rule and shouldn't be the only factor in your decision.

Renting costs: Monthly rent (which increases typically 5-10% yearly), renter's insurance. Buying costs: Down payment (typically 20%), monthly EMI on loan, property tax, home insurance, maintenance costs (typically 1% of property value/year), utility deposits, and potential renovation/upgrade costs. This calculator includes: annual rent increase, maintenance costs, property tax, and all principal/interest payments for accurate comparison.

Property appreciation can significantly favor buying. If a property appreciates at 7% annually, a ₹50 lakh home becomes ₹98.5 lakhs in 10 years and ₹193.5 lakhs in 20 years. This appreciation represents wealth building that renting cannot provide. However, appreciation is not guaranteed, varies significantly by location, and depends on market conditions. Include realistic appreciation estimates (5-10% based on historical data and location) in your decision analysis. This benefit becomes more significant the longer you own the property.

The break-even point is when cumulative buying costs (down payment + total EMI payments + maintenance) equal cumulative renting costs (total rent paid over the period). For most Indian cities, this break-even point is 7-15 years depending on property prices, appreciation rates, and rent inflation. Generally: If you plan to stay less than the break-even period, renting is usually cheaper. If you plan to stay longer, buying becomes financially advantageous due to appreciation and equity building. Use our calculator to find your break-even point.

Tax benefits significantly favor buying: Home loan interest is tax-deductible up to ₹2 lakh/year under Section 24, which can save 20-40% on effective EMI depending on your tax bracket. Principal repayment is not deductible. Property tax is paid to the municipality. Rent is not deductible for self-occupied homes, though it has implications under the gift/loan rules. Capital gains tax applies when you sell (long-term capital gains are taxed at 20%, but primary residence gets indexation benefit). These tax benefits make buying more attractive for higher-income individuals.

Opportunity cost is the returns you could earn by investing your down payment elsewhere instead of buying. For example, if you invest ₹10 lakhs (down payment) in stock market earning 12% annually instead of buying, after 20 years it becomes ₹96.4 lakhs. Meanwhile, property appreciation at 7% annually turns the same ₹10 lakh down payment investment into ₹38.7 lakhs in appreciating property value. However, the property also builds equity through EMI payments. Compare these returns to decide: Is your down payment better in real estate or in financial instruments? This depends on market conditions and your risk tolerance.

Absolutely! Financial math is only part of the decision. Renting offers flexibility to relocate for better job opportunities, career growth, or life changes without being tied down by property selling delays (6-12 months). Buying provides stability, emotional security of ownership, freedom to customize your home, and permanence for family. Consider your career trajectory: Early career with growth opportunities = rent flexibility matters. Stable career or post-retirement = ownership benefits matter. Also consider: Do you value flexibility or permanence more? Do you want to build wealth through real estate or other investments? Are you emotionally ready for homeownership responsibilities? Sometimes the non-financial factors matter more than the numbers.