Compare renting and investing against buying a house in India. Counts the deposit, EMI, interest, upkeep and selling costs, and names the year buying breaks even.
Why does renting win so often in this model?
Because the deposit and the buying costs are large sums that would otherwise be invested, and because an EMI in the early years is mostly interest rather than equity. Buying wins when rent is high relative to the price, when the flat appreciates faster than your investments, or when you stay long enough for the loan to be paid down.
What is the single most important input?
How long you will stay. Buying carries large one-off costs at both ends, and they only amortise over time. Under about five years those costs rarely get recovered. Everything else being equal, a longer stay favours buying.
Does this account for tax benefits on a home loan?
No, and that matters. Section 24(b) relief on interest, and HRA exemption if you rent, both change the real monthly cost. Neither is modelled here, so treat this as a pre-tax comparison and check the income tax and HRA pages for your own position.
Why does it charge selling costs even if I will not sell?
To compare like with like. The renting side ends with a portfolio that can be turned into cash. If the buying side is credited with the full market value of a house that would cost 2% to sell, it is being flattered. If you are certain you will never sell, set the selling cost to zero and see the difference.
What if I would not actually invest the difference?
Then renting will not perform as this page shows. The model assumes a disciplined renter who invests the deposit and every monthly saving. That assumption is the whole renting case. A forced-saving argument for buying is a real argument, and it is about behaviour rather than arithmetic.
Is 6% appreciation a reasonable assumption?
It is a placeholder, not a forecast. Indian residential prices have gone through long flat stretches and sharp runs, and they vary enormously by city and micro-market. Put in a figure you can defend for your own locality, and try a pessimistic one as well.