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Rent or buy: which suits your first home?
Neither is always right. Here is how to weigh them honestly, with real arithmetic instead of slogans.
“Rent is money down the drain” is only half true. Some of an EMI also goes down the drain: the interest. The fair comparison is rent against the costs of owning that you never get back, and how long you plan to stay.
Renting vs Buying, side by side
| Factor | Renting | Buying |
|---|---|---|
| Money up front | Security deposit, often a few months’ rent | Down payment, plus stamp duty, registration and (if under construction) GST |
| Monthly outgo | Rent, revised at renewal | EMI plus maintenance; EMI is fixed only if the rate is fixed |
| What you build | Nothing in the home; your savings stay invested elsewhere | Ownership, as each EMI’s principal part reduces the loan |
| Flexibility | Move at the end of the lease | Selling takes time and costs money |
| Tax | HRA exemption if your salary includes HRA and you choose the old regime | Old regime: deduction on home-loan interest (up to ₹2 lakh a year, self-occupied) and principal under the 80C limit; the new regime does not give these for a self-occupied home |
| Control | Landlord decides on repairs and changes | You decide, within society rules |
A worked example
Illustrative example only. These are not Reeva prices or a bank quote; change the numbers to your own in our calculators.
Say a home costs ₹75 lakh. You put down 20% (₹15 lakh) and borrow ₹60 lakh at 8.5% for 20 years. A similar flat rents for ₹25,000 a month.
- EMI: about ₹52,069 a month, plus ₹3,000 maintenance.
- Of the first EMI, about ₹42,500 is interest and only ₹9,569 reduces your loan.
- If the down payment had stayed invested at 6% a year, it would earn about ₹7,500 a month. That is income you give up by buying.
- So the cost you never get back in month one (interest + maintenance + forgone return) is about ₹53,000, against ₹25,000 of rent.
The gap narrows every year: the interest share of each EMI falls as the loan shrinks, while rent usually rises at each renewal. Whether buying “wins” depends on how long you stay and how the home’s value moves, which no one can promise you.
Our honest verdict
Who should pick which
Renting: a good fit if…
- You may change city or job in the next few years
- Your emergency fund would be emptied by the down payment
- Your total EMIs would leave too little to save each month
Buying: a good fit if…
- You expect to stay in one area for many years
- You have the down payment and costs saved, and a cushion left over
- A stable EMI matters more to you than flexibility
FAQ
Questions buyers ask
Is an EMI the same as paying rent to yourself?
Only partly. In the early years most of each EMI is interest paid to the bank. The principal part is what builds your ownership, and it grows as the loan shrinks.
Can I claim both HRA and home-loan tax benefits?
Under the old tax regime, yes, in some cases, for example when you rent in one city and own in another. The rules are set by the Income-tax law and change with each Finance Act, so confirm with a tax adviser.
How long should I plan to stay for buying to make sense?
There is no fixed number. Buying has one-time costs (stamp duty, registration, perhaps GST) that are spread over the years you stay. The longer you stay, the smaller they are per year.
What should I save before buying?
The down payment, stamp duty and registration, moving and furnishing, and an emergency fund you do not touch. Our down payment calculator adds these up.
Still weighing it up?
Tell the Reeva team what you are deciding between. We will call back and talk it through honestly, with no pressure to buy.