by datta Nighut 
In today’s world of high prices, one big question often pops up Should You Buy a House or Live on Rent? This is not just a financial decision, but a lifestyle one too. With rising property prices, growing cities, and changing job trends, it’s important to think smartly.
What is Rental Yield and Why It Matters
Before making any decision, it’s important to understand rental yield. It helps compare the cost of renting with the value of a property.
Rental Yield = (Annual Rent / Property Value) × 100
For example:
- If you pay ₹15,000 per month in rent, that’s ₹1.8 lakh per year.
- If the house value is ₹50 lakh, then the rental yield is 3.6%.
This means your landlord earns 3.6% of the house value from you every year.
Now, many people say, “Renting is a waste of money—you’re not building any asset.” But is that always true? Let’s explore that with some real numbers and examples.
The Key Factors to Consider
We used an Excel sheet (available online) to analyze this question. You can download it, play with the numbers, and make your own decision.
Here’s what we considered:
- Time period: 20 years
- Three major cities: Delhi, Mumbai, and Bengaluru
- Rental yields in 2025:
- Delhi: ~2.9%
- Mumbai: ~3.3%
- Bengaluru: ~3.8%
Let’s assume:
- House cost: ₹1 crore
- Rent (Delhi): ~₹25,000/month or ₹3 lakh/year
You can change these numbers in the sheet depending on your city and situation.
Renting a House: Is It Really That Bad?
When you rent a house, you don’t need to pay a down payment. That money can be invested elsewhere.
Also, rent is usually less than EMI, which means the difference can be invested through SIPs (Systematic Investment Plans) and earn returns.
Let’s assume:
- ₹1 crore house in Delhi
- Monthly rent: ₹25,000
- You get HRA (House Rent Allowance) benefit: 20%
- Effective rent after tax: ₹20,000/month or ₹2.4 lakh/year
If rent increases 10% every year, you will pay about ₹1.32 crore over 20 years.
But due to inflation (say 6% yearly), the value of that ₹1.32 crore in today’s terms is about ₹64 lakh.
That seems like a lot. But don’t forget:
- You saved the down payment (₹25 lakh) and invested it.
- You saved the EMI-rent difference, and invested that too.
If these investments grow at 10% annually:
- Your initial ₹25 lakh grows to around ₹1 crore
- SIP investments grow to around ₹1.5 crore
- Total value in today’s terms: ₹1.1 crore
So while you spent ₹64 lakh in rent (adjusted for inflation), you earned ₹1.1 crore. That’s a net benefit of ₹46 lakh just by renting in Delhi.
Even in Mumbai and Bengaluru, the benefit is around ₹25 lakh and ₹12 lakh respectively (adjusted).
What Happens When You Increase the Time Period?
This is where things start changing.
- At 30 years, renting is still better in Delhi.
- But in Mumbai and Bengaluru, buying becomes better.
- At 40 years, buying is better in all three cities.
Why? Because over a long time, rent increases every year, and the house value also appreciates. So ownership starts making more sense.
But the big question is:
Will you live in the same city, same house, same locality for 30-40 years?
If not, renting might still be smarter.
Buying a House: The Real Cost
Let’s now see what happens when you buy that ₹1 crore house.
Here’s the breakdown:
- Down payment: ₹25 lakh (25%)
- Registration cost: ₹5 lakh (5%)
- Loan amount: ₹75 lakh
- Interest rate: 8%
- EMI for 20 years: ₹63,000/month
With home loan benefits under old tax rules, your effective EMI might be around ₹55,000/month.
Compare that to the rent of ₹25,000/month, and you see you’re paying more than double every month.
Let’s also add:
- Maintenance costs (average): ₹4,000/month increasing by 5% yearly
- Total maintenance over 20 years: ₹16.5 lakh (₹8.75 lakh after inflation)
- Interest paid to bank: ~₹58 lakh (₹40 lakh after inflation)
So your total cost (house + interest + maintenance) = ₹1.5 crore
Now assume house value grows by 8% per year:
- After 20 years, your house will be worth ~₹2 crore
- After adjusting for inflation, it’s worth ₹1.45 crore
Net benefit of buying: ₹1.45 crore (value) – ₹1.5 crore (cost) = -₹5 lakh
Yes, a small loss.
When is Buying Better?
Let’s now compare the net benefit of renting and buying:
| City | Net Benefit of Renting (20 yrs) | Net Benefit of Buying (20 yrs) |
|---|---|---|
| Delhi | ₹46 lakh | -₹5 lakh (loss) |
| Mumbai | ₹25 lakh | Slight loss |
| Bengaluru | ₹12 lakh | Slight loss |
But if we increase the time period to 30 or 40 years:
- Net benefit of buying increases
- Renting benefit decreases due to rising rent
For example:
- At 30 years, buying is better in Mumbai and Bengaluru
- At 40 years, buying is better in all cities
This proves: Time is the key factor.
So, What Should You Do?
Here’s a quick summary:
Rent if:
- You are in your 20s or early 30s
- You might change cities, jobs, or countries
- You want financial flexibility
- You can invest the saved money wisely
Buy if:
- You are in your mid-30s or later
- You are settled in one place
- You plan to stay for 20-30+ years
- You want emotional and financial stability
Final Thoughts
Buying a house is not just about money—it’s about your life goals.
Many young people feel pressure from society, family, or peers to buy a home early. But making a rushed decision can trap you financially and emotionally.
Don’t buy a house just because others are doing it.
Buy a house when you are ready—financially, mentally, and emotionally.
Until then, renting is not a waste. It can be a smart, flexible, and profitable choice—if planned wisely.
