Rent vs buy calculator: what actually decides the answer

Why another rent vs buy tool

Most rent-or-buy comparisons forget that the renter does not sit on the down payment. They keep it, and they keep the gap between an EMI and a rent cheque every month. The rent vs buy calculator builds that in: the renter invests every rupee the buyer sinks into the home, and the comparison is net worth on both paths at the end. It is the method set out in the guide Rent vs buy: the honest math.

The inputs

Some assumptions are fixed and not on the form. The loan always runs 20 years. Buying costs 6% in stamp duty and registration plus 1% in other costs. Maintenance is 1% and property tax 0.1% of the home's current value each year, and selling costs 2% at the end. No home-loan tax relief is applied.

"Rent for the same home" is the input to check hardest. ₹30,000 on a ₹1 crore flat is a gross yield of 3.6%. Our post on what a flat really earns shows how thin metro yields are once costs come off.

The outputs

Three boxes: Buying, after 20 years (the home's value less selling costs and any loan left, plus anything the buyer invested), Renting and investing (the renter's corpus), and Renting ahead by or Buying ahead by. Under the last box a line says "buying overtakes in year N" or "buying never overtakes here". A chart, "Net worth on each path, year by year", draws both lines.

Worked example: the defaults

Renting ahead by ₹3.08 crore, and buying never overtakes. The renter starts with ₹27 lakh invested (the ₹20 lakh down payment plus ₹7 lakh of buying costs), and adds each year's difference between the buyer's outgo and the rent. The EMI on the ₹80 lakh loan alone is far above ₹30,000 a month, so that difference is large for most of the 20 years.

Which inputs flip the result

Change one or two sliders at a time, keeping everything else at the defaults:

The answer turns on the gap between property appreciation and investment return. Raise the return and renting pulls away; raise appreciation and buying catches up. Neither number can be known in advance, which is why a single verdict from the calculator means less than the range you get from moving these two sliders. A bigger down payment barely moves the buyer's figure here, because the renter invests that extra cash too.

One reading trap: "buying overtakes in year N" reports the first year the buyer's line crosses above. On some inputs the lines cross more than once, so check the chart and the final boxes together.

What the calculator does not price

• Tax relief under the old regime. Interest deduction up to ₹2 lakh and principal under section 80C apply only under the old regime, and are not applied here. Under the new regime a self-occupied buyer gets nothing, and that alone changes many older comparisons.
• Tax on the renter's corpus. The renter's investments are shown before capital gains tax.
• Things without a number. Security of tenure, freedom to renovate and not having to move when a landlord sells are real and unpriced. So is the concentration of most of your net worth in one illiquid asset.
• Rent that tracks the price. Rent inflation and appreciation are set separately. If you think rents will rise with prices, set them equal.

Next steps

To check whether the purchase is one you could finance, start with the home loan eligibility calculator and our post on home loan eligibility by salary. The home loan EMI calculator shows the buyer's schedule, and the SIP calculator shows what the renter's monthly surplus grows to on its own. If you are weighing a SIP against the loan's interest, see whether an interest-free home loan holds up. Then run your own city's price and rent through the rent vs buy calculator, at two or three return assumptions rather than one. None of this is advice to buy or rent.