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Renting could be a good option for young professionals in urban areas, as home loan EMIs could be much higher than the monthly rental expenses.
A typical two-bedroom apartment in Bengaluru, Mumbai and Delhi may cost around Rs 1- Rs 1.5 crore. (Representative Image)
With the rising real estate costs across major cities in India, buying a home could be a difficult task for many. However, owning a home can become a reality with prudent financial planning. Many first-time home buyers in urban areas often face the dilemma of buying a house with a home loan or simply sticking to renting.
While buying a residential property gives a feeling of ownership and a sense of security, the equated monthly instalments (EMIs) for home loans could be financially burdensome. Home loans come with a longer repayment tenure, generally spanning at least 15-20 years. Availing a home loan means a long-term repayment commitment of a substantial amount every month.
On the other hand, monthly rental expenses for a property could be much lower than the EMIs. Also, renting keeps your monthly budget predictable and you can plan your investments accordingly. Rental accommodations can also be changed as per your financial condition and it offers more flexibility for financial planning. A lower monthly rent, compared to EMIs, leaves more money in hand for investments.
Let’s understand the math behind buying a home with a home loan, which could help you in resolving the EMI versus rent dilemma.
Understanding the Basic Math
A typical two-bedroom apartment in Bengaluru, Mumbai and Delhi may cost around Rs 1- Rs 1.5 crore. If a buyer takes out a home loan of around Rs 80 lakh with an interest rate of 8.5% for 20 years, the monthly instalments will be close to Rs 69,000–70,000. Meanwhile, the monthly rent for a 2BHK house may cost between Rs 30,000 and Rs 40,000. So, in this case, renting could be a more viable option as it leaves a substantial amount in your hand, which could be invested for various financial goals.
It’s important to evaluate your future goals and assess what could be a more financially viable option. The monthly differential of around Rs 30,000-40,000 between rent and EMIs could be utilised wisely for building a large corpus in the long run.
Prospective buyers must determine if it makes more sense to pay a higher EMI for ownership compared to paying a cheaper rent.
Why Renting Still Looks Attractive
Renting helps minimise monthly spending for the majority of young professionals, especially those living in metro cities. This saved amount can be judiciously invested to build a corpus for buying a home later instead of paying higher EMIs.
For instance, a monthly investment of Rs 40,000 in a mutual fund SIP can grow manifold over the next 20 years to around Rs 4 crore at an assumed interest rate of 12% per annum. This amount can be utilised to buy a home later.
Secondly, renting presents an opportunity to downsize, relocate due to work, or even move to a different town without the worry of selling the house. Thirdly, renting helps avoid tertiary costs not undertaken by renters but required of buyers, including maintenance costs, property taxes, registration costs, stamp duties, and renovation expenses.
When Buying Makes Sense
Owning a property could still be beneficial for those who are looking for stability and planning to stay in a city permanently. Property values may increase with time. For instance, a house for Rs 1.2 crore may increase in value significantly over the course of 20 years if it appreciates at a rate of 10% each year.
The difference between EMI and rent reduces in tier 2 and tier 3 cities, where real estate costs and rental rates are lower. Compared to metropolitan regions, this might make ownership more financially appealing earlier.
Additionally, a large number of these cities are developing into major economic centres with strong long-term growth prospects. Depending on the investor’s long-term objectives and risk tolerance, buying a home might be a financially prudent decision in certain situations.
When comparing rent vs purchase, financial advisors frequently apply the following principles:
Ownership may prove more rewarding if rent covers at least half of EMI (for example, Rs 40,000 rent against Rs 80,000 EMI).
If EMI is much higher than rent, renting and investing the differential amount could be more beneficial for long-term wealth building.
Final Takeaway
There is no one-size-fits-all solution. While renting promotes freedom and lower monthly costs, buying ensures stability and ownership. What you value most—financial freedom or building wealth—will determine your choice.
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Delhi, India, India
February 08, 2026, 09:00 IST
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