Should I buy a house or keep renting?

Every family has heard it: rent is money down the drain, buy a house and you will never regret it. At the same time, flat prices in the big cities have climbed so far that the EMI for a modest two-bedroom flat can take half a salary. So which is it?

The honest answer is that buying and renting are both reasonable choices. The right one depends on how long you will stay, how much you have saved, how big the EMI is compared with your take-home pay, and how much the security of owning matters to you. Let us put real-looking numbers on each.

What does buying actually cost?

The price on the brochure is only the start. When you buy, four kinds of money leave your account:

1. The down payment. Banks lend only part of the value, so you pay the rest from savings.
2. One-time costs. Stamp duty and registration (which vary by state), brokerage, and interiors. These are often several lakh and do not come back.
3. The EMI. Principal plus interest, every month, for 15–25 years.
4. Running costs. Society maintenance, property tax and repairs, which rise over time.

Interest is the part people underestimate. At the time of writing (October 2026), home-loan rates at large banks start at about 7.5% and go higher depending on your credit score, and the RBI raised the repo rate to 5.50% on 7 October 2026, so rates are moving up.

Illustration: A flat costs ₹1 crore. The buyer pays ₹20 lakh down and spends an assumed ₹8 lakh on registration, stamp duty and interiors, so ₹28 lakh leaves savings on day one. The remaining ₹80 lakh is a 20-year loan at an assumed 8.5%. The EMI comes to about ₹69,400 a month, and over 20 years the total interest is about ₹87 lakh — more than the loan itself. At 7.5% the EMI would be about ₹64,400 (interest about ₹75 lakh); at 9.5%, about ₹74,600 (interest about ₹99 lakh). (Illustrative numbers, not a quote from any lender.)

What does renting cost by comparison?

Renting the same flat might cost ₹28,000 a month in this illustration — under 0.3% of the flat's value each month, or about 3.4% a year. That is well under half the EMI on the same flat, which is the gap that makes renting worth a serious look.

But rent also rises, typically every year or at each renewal. And you can be asked to move. Those are real costs, even if they do not show up as interest.

How do the two compare over 20 years?

The fair test is not "rent versus EMI". It is this: if the renter invests the ₹28 lakh that the buyer spent upfront, and every month also invests the difference between the buyer's outgo (EMI plus maintenance) and his own rent, how does his savings pot compare with the buyer's flat after 20 years?

Every figure here is an illustration built on assumptions, not a forecast. Property prices and investment returns are not guaranteed, taxes are ignored, and actual outcomes can be very different.

On these assumptions the renter can come out ahead — but only if two things hold. First, he really does invest the full difference every single month for 20 years, without dipping into it. Second, returns on his investments are not far below the low case. In practice, many renters spend the difference. The buyer, on the other hand, is forced to save through the EMI, and by year 20 owns a home outright with no rent to pay in retirement.

So the numbers lean towards renting in expensive cities, but behaviour often decides the real result.

How much EMI can your salary safely carry?

This is where many home purchases go wrong. A common rule of thumb is that all your EMIs together should stay within about 35–40% of take-home pay, and less if you have school fees, dependent parents or a single income. Our guide on how much EMI is too much for your salary goes into this in detail.

In the illustration above, an EMI of about ₹69,400 would need a take-home of roughly ₹1.75–2 lakh a month to stay inside that range. On ₹1.2 lakh, the same EMI would swallow nearly 58% of the salary, leaving almost nothing for a buffer, insurance or investing.

The sequence matters here too. Before buying, the emergency fund should already be in place and separate from the down payment, and any expensive debt should be cleared. A family that empties every FD for the down payment and then faces a medical bill in the first year often ends up on a credit card at a far higher rate than the home loan. This is the same order that keeps any salary steady, explained in why a good salary can leave nothing by month end.

When does buying make more sense?

Buying usually fits better when:

• You expect to live in the same city, ideally the same area, for 10 years or more.
• The EMI sits comfortably within the 35–40% range, with room for rates to rise.
• You have the down payment and one-time costs without touching your emergency fund.
• Rent for a similar home in your area is high compared with the EMI.
• You value stability: children's schools, ageing parents nearby, no landlord asking you to move.

That last point is not irrational. A home you own gives a sense of security that no spreadsheet captures, and in retirement it removes rent from your monthly budget. These are legitimate reasons to buy, as long as the EMI does not put the rest of the family's finances at risk.

When does renting make more sense?

Renting usually fits better when your job may move you, when you are still building savings, when the EMI would cross 40% of take-home, or when prices in your city are very high compared with rents. Renting also leaves your money free for other goals, such as children's education or clearing other loans.

If you rent, the discipline has to come from you. Move the money you would have spent on an EMI into investments on salary day, every month, before any spending happens.

What if you have already bought?

Then the question becomes how to carry the loan well. Keep the buffer and emergency fund intact, clear any costlier loans before prepaying the home loan, and then decide whether extra money should go towards prepaying the home loan or investing. Under RBI rules, floating-rate home loans to individuals generally carry no prepayment penalty, so you can prepay whenever it suits you.

Whether to buy, and how to fit the EMI into the rest of your salary, is exactly the kind of ordering we map in a first conversation.