Renting vs. Buying a Home in India: Expense Comparison with Actual Amounts

When deciding between renting vs buying a home in India, it’s important to understand the financial implications of both. The cost difference between renting and buying can vary significantly based on the city, location, property size, and other factors. Below is a comparison of the actual expenses involved in both scenarios to help you make an informed decision.

1. Renting a Home in India: renting vs buying

Initial Costs of Renting

• Security Deposit: Typically, renters need to pay a security deposit ranging from 2 to 10 months’ rent depending on the city.
  • Example: For a property in Bangalore with a monthly rent of ₹30,000, the security deposit could be ₹1,80,000 to ₹3,00,000.
• Brokerage: If you use a real estate broker, the standard brokerage fee is usually 1-2 months’ rent.
  • Example: In the same Bangalore property, brokerage could be around ₹30,000 to ₹60,000.

Monthly Costs of Renting

• Rent: Rent varies based on the city and location.
  • Example: A 2BHK apartment in Mumbai can cost ₹50,000 to ₹80,000 per month, while in Hyderabad, a similar apartment might rent for ₹25,000 to ₹40,000 per month.
• Maintenance Charges: In most cases, the landlord pays maintenance charges, but this can vary.
  • Example: Some properties may require an additional ₹2,000 to ₹5,000 per month for maintenance.

Annual Rent Increase

• Typically, landlords increase rent by 5-10% annually.
  • Example: If your rent is ₹30,000, it could increase to ₹31,500 to ₹33,000 after one year.

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2. Buying a Home in India : renting vs buying

Initial Costs of Buying

• Down Payment: The down payment for a property is usually 20-25% of the property value.
  • Example: For a ₹1 crore apartment in Pune, you would need to pay a down payment of ₹20-25 lakhs.
• Registration and Stamp Duty: Registration and stamp duty charges vary by state, typically between 5-7% of the property value.
  • Example: For a ₹1 crore home in Delhi, stamp duty could range from ₹5 to ₹7 lakhs.
• Brokerage: If you buy through an agent, brokerage fees are typically 1-2% of the property value.
  • Example: For a ₹1 crore home, the brokerage could be ₹1-2 lakhs.

Monthly Costs of Buying

• Home Loan EMI: Assuming you take an 80% loan on a ₹1 crore property at an interest rate of 8% for 20 years, the EMI would be around ₹75,000 to ₹80,000 per month.
• Maintenance Charges: Homeowners need to pay maintenance fees to the housing society.
  • Example: For a 2BHK in Mumbai, this could range from ₹3,000 to ₹10,000 per month.
• Property Tax: Homeowners also pay an annual property tax, which depends on the city and size of the property.
  • Example: In Chennai, property tax for a 2BHK might be around ₹10,000 to ₹20,000 annually.

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3. Comparing Renting vs. Buying Costs Over 5 Years : renting vs buying

Renting:

• Monthly Rent in Mumbai: ₹50,000
• Security Deposit: ₹3,00,000
• Annual Rent Increase (7%):
  • Year 1: ₹50,000
  • Year 2: ₹53,500
  • Year 3: ₹57,245
  • Year 4: ₹61,251
  • Year 5: ₹65,539
• Total Rent Paid in 5 Years:
  ₹50,000 × 12 + ₹53,500 × 12 + ₹57,245 × 12 + ₹61,251 × 12 + ₹65,539 × 12 = ₹37,74,948 (~₹38 lakhs)

Buying:

• Property Value: ₹1 crore
• Down Payment (20%): ₹20,00,000
• Home Loan EMI (₹75,000/month for 5 years):
  ₹75,000 × 12 × 5 = ₹45,00,000
• Stamp Duty (7%): ₹7,00,000
• Maintenance (₹5,000/month):
  ₹5,000 × 12 × 5 = ₹3,00,000
• Total Cost in 5 Years:
  ₹20,00,000 (down payment) + ₹45,00,000 (EMIs) + ₹7,00,000 (stamp duty) + ₹3,00,000 (maintenance) = ₹75,00,000 (~₹75 lakhs)

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Conclusion: Renting vs. Buying

• Renting: Over 5 years, you could spend approximately ₹38 lakhs renting a 2BHK in Mumbai, assuming a moderate rent increase. This amount is gone, and you don’t own any property at the end of the period.
• Buying: In contrast, if you buy a ₹1 crore home, you would spend around ₹75 lakhs in 5 years (including down payment, EMIs, and other costs). However, you would be building equity in your property, which may appreciate in value over time.

Key Takeaways:

• Renting is more affordable in the short term, with lower upfront costs, but you don’t build long-term wealth.
• Buying requires a significant upfront investment but can be a good financial decision over time, especially if property prices appreciate.

Ultimately, the decision depends on your financial situation, lifestyle, and long-term goals. Renting is flexible, but buying helps build an asset for the future.

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