Rent or buy? We ran the 20-year numbers on a ₹60 lakh flat
Take a ₹60 lakh flat in a large Indian city. Buying it typically means about ₹15.9 lakh upfront (₹12 lakh down payment plus roughly ₹3.9 lakh of stamp duty and registration) and a ₹48 lakh loan at 8.5% for 20 years — an EMI of ₹41,656. Renting the same flat at a typical 3.5% rental yield costs about ₹17,500 a month to start.
That gap — EMI plus maintenance minus rent, roughly ₹27,000 a month in year one — is the whole argument. We simulated it month by month for 20 years: the renter invests the upfront ₹15.9 lakh and the monthly difference at 12%, while rent and maintenance rise 5% every year. No hand-waving, no “rent is throwing money away” slogans. Here is what falls out.
The 20-year scoreboard
After 240 months, the renter’s portfolio reaches ₹3.88 crore. The buyer owns the flat outright — worth ₹1.59 crore if property appreciated at 5% a year, ₹2.32 crore at 7%, and ₹2.80 crore at 8%. Even at 8% appreciation, which most Indian residential markets have not sustained over 20-year stretches, the buyer trails the 12%-return renter by more than a crore.
Soften the renter’s return to 10% and the portfolio is ₹2.77 crore — now roughly level with a flat appreciating at 8%, and still ahead of one appreciating at 7%. The honest way to say it: buying wins financially only when property appreciation gets within a couple of points of equity returns. Historically, in most Indian cities, it hasn’t. Yields tell the same story from the other side — when a ₹60 lakh flat rents for ₹17,500 a month, the market itself is pricing the flat’s income at 3.5%, and the rest of the return has to come from appreciation that may or may not show up.
| Scenario | End value |
|---|---|
| Renter, difference invested at 12% | ₹3.88 crore |
| Renter, difference invested at 10% | ₹2.77 crore |
| Buyer, flat appreciates 8%/yr | ₹2.80 crore (flat, owned) |
| Buyer, flat appreciates 7%/yr | ₹2.32 crore |
| Buyer, flat appreciates 5%/yr | ₹1.59 crore |
What the simulation charges each side
The buyer pays: ₹15.9 lakh upfront (down payment, stamp duty at ~6.5%, registration), the ₹41,656 EMI for 240 months, and maintenance starting at ₹3,000 a month rising 5% a year. The renter pays rent starting at ₹17,500, also rising 5% a year — by year 20 it is ₹46,433 a month, which is the number rent-vs-buy debates always throw at renters. The simulation includes it. The renter still finishes ahead, because the early-year differences were compounding for two decades while rent was catching up.
We deliberately left out two things that cut both ways. Tax: under the new regime a self-occupied buyer gets no interest deduction, and the renter’s equity gains face 12.5% LTCG on redemption — roughly a wash, with the exact split depending on your regime and state. Transaction costs on exit: selling a flat costs 2–4% in brokerage and makes the buyer’s number look better than it will feel. Run your own loan side of it with the home loan EMI calculator preset to this exact scenario, and the renter side with the SIP calculator.
The uncomfortable variable: you
The renter’s ₹3.88 crore assumes 240 consecutive months of investing the difference — through job changes, market crashes, weddings, and every year rent rises and the investable gap shrinks. Almost nobody audits themselves honestly here. An EMI, by contrast, is enforced saving: the bank makes sure the buyer “invests” every month by threatening their credit score.
This is why the standard advice fails people on both sides. Disciplined investors who buy early lock a mediocre asset with their best compounding years. Undisciplined savers who rent “to invest the difference” spend the difference, and at 45 have neither flat nor corpus. If you know which one you are, the decision is mostly made. If you don’t, the EMI’s forced discipline has real value the spreadsheet can’t see — and a fee-only planner an hour of whose time costs less than one month’s EMI can tell you which one you are from your last two years of bank statements.
When buying is simply right
None of this applies to reasons that aren’t financial. You want to drill a wall without permission, your children’s school admission depends on the address, a landlord can’t evict you, and a 15-year horizon in one city makes transaction costs irrelevant. Those are legitimate reasons to buy, and the simulation doesn’t vote against them — it only prices them. At 5% appreciation the “cost” of choosing ownership over renting-and-investing is roughly ₹2.3 crore over 20 years. For many families the stability is worth exactly that. The mistake is not buying; it is buying while believing it is also the best investment.
Two rules keep a purchase safe regardless: keep the EMI under 40% of take-home pay (banks will lend you more — see how eligibility actually works), and do not empty the emergency fund into the down payment. A house you can barely hold through one job loss is not stability.
Questions people ask
Is renting really cheaper than buying in India?
Month to month, almost always — rental yields run 2.5–4% of the property’s value while EMIs on an 80% loan run far higher. Over 20 years the question becomes whether the invested difference out-compounds the flat’s appreciation. At typical values (12% equity, 5–7% property), it does.
What appreciation rate makes buying win?
In our ₹60 lakh simulation, the flat needs roughly 8% annual appreciation to match a renter earning 10% on investments, and 9%+ to match one earning 12%. Sustained 8–9% appreciation over two decades has been rare in Indian metros outside exceptional micro-markets.
Doesn’t rising rent destroy the renter over time?
Rent rising 5% a year is in the simulation — by year 20 it is ₹46,433 a month against the buyer’s frozen ₹41,656 EMI. The renter still ends ahead because the surplus from the early, cheap-rent years compounds for the full period. Rent wins late; compounding wins overall.
What about the tax benefits of a home loan?
Under the new regime there is no deduction on self-occupied home loan interest, so for most salaried buyers the classic tax argument for buying has quietly disappeared. Let-out properties still deduct interest against rent, which shifts the math for pure investment purchases.
Should I sell my flat and rent instead?
That is a different, harder question — it involves capital gains tax, transaction costs of 2–4%, and your family’s attachment to the home. The simulation argues against buying a second flat as an investment far more strongly than it argues for selling the one you live in.
Figures are computed with the same engines as our calculators, at the assumptions stated. This is general information, not investment or tax advice — AtFinance is not a SEBI-registered adviser.