Should you Buy or Rent?

The calculator models the complete financial trajectory of both choices over your chosen time horizon. For buying, it factors in upfront down payment, stamp duty, monthly EMIs, property maintenance, insurance, tax savings under Section 80C and 24(b), and long-term capital appreciation. For renting, it tracks monthly rent, annual rent inflation, security deposit, and importantly the compounding growth of investing the upfront savings and monthly cash flow differences into a market portfolio.

The buying model factors in: (1) Down payment (typically 10-30%), (2) Stamp duty and registration charges (3-8%), (3) Monthly loan EMIs based on prevailing interest rates and tenure, (4) Society maintenance charges with inflation, (5) Property insurance, and (6) Net tax rebates on home loan interest and principal.

Tax savings are calculated based on your personal income tax bracket. Under Section 24(b), deductions up to ₹2 Lakh per financial year are available on home loan interest. Under Section 80C, principal repayments up to ₹1.5 Lakh qualify for deductions. The actual cash saved equals the eligible deduction multiplied by your effective tax rate.

When buying a home, the down payment and registration fees represent substantial upfront capital lock-in. A renter who avoids this outlay can invest that entire amount in equity mutual funds or diversified portfolios at an assumed 10-14% CAGR, which often generates exponential compound wealth over a 10-20 year period.

Property appreciation is the primary driver of homeownership net worth. Indian residential real estate in tier-1 metro areas historically appreciates between 5-8% annually over multi-decade cycles. A higher appreciation rate tilts the mathematical advantage towards buying.

For Indian retail investors allocating monthly surplus into diversified equity and hybrid mutual funds, a long-term CAGR of 11-13% is reasonable based on Nifty 50 and BSE 500 historical performance over 10+ year rolling periods.

In major Indian metros where rental yields average 2.5-3.5% and home loan interest is 8.5-9%, renting is usually financially superior over short-to-medium horizons (3-8 years). Buying tends to break even when the tenure extends beyond 12-15 years, as fixed EMIs diminish in real terms against rising rents.

This calculator focuses strictly on financial net worth and cash flows. However, homeownership provides psychological security, permanence, and freedom from landlord restrictions, which many families value beyond pure financial yield.