Rent vs Buy: Why Paying ₹75,000 Rent Isn't Always Cheaper Than Buying a ₹4 Crore House

Introduction: The Popular Rent vs Buy Debate

The decision to rent or buy a home is one of the most significant financial choices many people face. Influencers, friends, and family often share opinions, sometimes based on emotions rather than facts. A popular claim circulating recently is that paying ₹75,000 monthly rent is financially smarter than buying a ₹4 crore house.

At first glance, ₹75,000 rent per month might seem manageable compared to the hefty EMI of a home loan. However, this perception ignores critical factors such as rent inflation, loan interest dynamics, property appreciation, and the opportunity cost of down payment investments.

To cut through the noise, we used the Buy vs Rent Calculator with realistic inputs and assumptions to analyze this scenario in depth. The results reveal surprising insights that challenge common beliefs.

Scenario Setup: The Numbers We Used

Let’s first outline the assumptions for our analysis:

• Rent: ₹75,000 per month initially, increasing at 10% every year.
• Property price: ₹4 crore (₹40 million).
• Down payment: ₹80 lakh (₹8 million), which is 20% of the property price.
• Home loan: ₹3.2 crore (₹32 million) at 8.5% interest rate, tenure 30 years.
• Down payment investment return: 8% per annum (assumed if invested elsewhere).
• Property appreciation: Assumed at 6% per annum (conservative estimate).

These inputs reflect a typical urban Indian real estate purchase and rental market scenario, with rent inflation higher than general inflation, which is common in many metro cities.

Why Rent Feels Cheaper — But Isn't

When you pay ₹75,000 rent, it feels like a fixed monthly outflow you can budget for. Meanwhile, a home loan EMI for a ₹4 crore house with an 8.5% interest rate over 30 years is often perceived as intimidatingly high, sometimes ₹2.5 lakh or more per month.

This emotional bias leads many to believe renting is cheaper. But the key is that rent rarely stays constant. It typically increases every year, often faster than inflation, due to market demand, location desirability, and other factors.

In our scenario, rent increases by 10% annually. That means after just 10 years, the rent will more than double, and by 30 years, it will be over 19 times the initial rent! This exponential increase drastically raises the total rental outflow over the long term.

Understanding EMI Stability and Inflation’s Role

Unlike rent, the EMI on a home loan remains fixed throughout the loan tenure (assuming a fixed-rate loan). This means your monthly payment does not increase with inflation or market conditions.

However, inflation plays a crucial role in reducing the real burden of your EMI payments. If inflation averages around 6-7% annually, the real value of your fixed EMI decreases over time. In other words, ₹2.5 lakh today might feel like ₹1.5 lakh in 10 years, and even less in later years.

This “inflation advantage” is a powerful reason why home loans can be more affordable than they appear, especially when viewed over decades.

Crunching the Numbers: Renting Costs Over 30 Years

Let’s calculate the cumulative rent paid over 30 years with a 10% annual increase starting from ₹75,000/month.

Using the formula for the sum of a geometric series:

 Total Rent Paid = Monthly Rent × 12 × [(1 - (1 + Rent Growth Rate)^Years) / (1 - (1 + Rent Growth Rate))] = 75,000 × 12 × [(1 - (1 + 0.10)^30) / (1 - 1.10)] 

Plugging in the numbers:

• Monthly rent = ₹75,000
• Annual rent growth = 10%
• Years = 30

The total rent paid over 30 years comes to approximately ₹6.75 crore (₹67.5 million).

This staggering amount highlights how rent inflation can dramatically increase your lifetime housing cost.

Home Loan EMI and Total Cost Over 30 Years

Now, let’s analyze the home loan side. For a ₹3.2 crore loan at 8.5% interest over 30 years, the EMI can be calculated using the standard EMI formula:

 EMI = [P × r × (1 + r)^n] / [(1 + r)^n – 1] Where: P = Principal = 3,20,00,000 r = monthly interest rate = 8.5% / 12 / 100 = 0.0070833 n = total months = 30 × 12 = 360 

Calculated EMI is approximately ₹24.32 lakh per month (₹243,200).

Over 30 years, total EMI payments = ₹24.32 lakh × 360 = ₹8.75 crore.

But this is not the whole story. We must consider:

• The down payment of ₹80 lakh upfront.
• The opportunity cost of investing that down payment at 8% per annum.
• The inflation-adjusted value of EMI payments.
• The appreciation of the property itself.

Opportunity Cost of the Down Payment

If you didn’t buy the house, you could invest ₹80 lakh at 8% annual returns. Using compound interest:

 Future Value = P × (1 + r)^t = 80,00,000 × (1 + 0.08)^30 ≈ ₹1.01 crore 

So, the down payment invested elsewhere grows to about ₹3.17 crore over 30 years.

This is a significant amount, and it must be accounted for when comparing rent vs buy.

Property Appreciation: Building Long-Term Wealth

The ₹4 crore house is also expected to appreciate at 6% annually. Using compound growth:

 Future Value = 4,00,00,000 × (1 + 0.06)^30 ≈ ₹22.8 crore 

This means after 30 years, your property could be worth nearly ₹23 crore, a massive increase and a valuable asset.

Putting It All Together: Net Cost Comparison

Now let’s summarize all cash flows and asset values in a comparative table:

Interpretation: Renting costs you ₹6.75 crore over 30 years with no asset accumulation, while buying results in a net asset gain of over ₹13 crore after considering all costs and opportunity costs.

Why This Matters: The Power of Long-Term Thinking

The key takeaway is that homeownership builds wealth over time, while renting is a pure expense with no return. The fixed EMI combined with inflation’s erosion of real payment burden and property appreciation creates a powerful wealth-building effect.

Conversely, rent increases steadily, often outpacing inflation, making renting more expensive in the long run.

Real-World Example: Mumbai Housing Market

Consider Mumbai, where rents have historically increased 8-12% annually, while property prices have appreciated around 6-8%. Many renters face rent hikes every year, while homeowners enjoy stable EMIs and capital appreciation.

For instance, a 1 BHK apartment in a prime area rented at ₹50,000 in 2010 would cost over ₹1.5 lakh in rent by 2020, while the EMI for buying a similar apartment might have remained stable.

Psychological and Lifestyle Factors

Beyond numbers, renting offers flexibility and less responsibility for maintenance, which some people prefer. Buying ties you down but offers stability and pride of ownership.

These factors are important but should be weighed alongside financial implications.

Common Objections and Rebuttals

“What if property prices crash?”

Real estate markets can be cyclical, but over 30 years, historical data shows consistent appreciation in most urban areas. Diversifying investments and choosing good locations mitigate risk.

“I don’t have enough for a down payment.”

Saving for a down payment is a challenge but essential for wealth building. Renting indefinitely without saving can lead to lost opportunities.

“Maintenance and taxes add to cost.”

True, but these costs are often less than rent inflation and are partially offset by property appreciation and tax benefits on home loans.

Visualizing the Cost Difference

Below is a simple graph showing cumulative rent vs cumulative EMI payments over 30 years (in crores):

*Note: Graph is illustrative showing cumulative cost trends over 30 years.

Final Thoughts: Facts Over Opinions

The rent vs buy debate is often clouded by emotions and short-term thinking. Our detailed analysis shows that while rent may feel cheaper initially, the long-term financial impact favors buying property, especially when considering inflation, asset appreciation, and stable EMIs.

Next time you hear someone claim that paying ₹75,000 rent is better than buying a ₹4 crore house, use real numbers and calculators to show the truth. Facts always outweigh opinions.

Remember, personal finance is personal — but it should always be informed by data, logic, and long-term vision.

Summary

• Rent inflation significantly increases lifetime housing costs.
• Fixed EMIs combined with inflation reduce real payment burden over time.
• Property appreciation builds wealth and offsets loan costs.
• Opportunity cost of down payment investment should be considered.
• Renting offers flexibility but no asset accumulation.
• Buying a home is a long-term wealth-building strategy, not just a monthly payment.

Use tools like the Buy vs Rent Calculator to analyze your specific situation before making this critical decision.