Buy or rent — the break-even year
How many years a client must stay before buying beats renting, run at their own numbers — including the version where prices do not rise at all.
Your numbers
| Monthly EMI | — |
| Monthly cost of owning vs renting todayEMI plus ownership costs, less today's rent. Usually negative — owning costs more monthly. | — |
| Upfront cost of buyingDown payment plus duty and fees, none of it recoverable on a quick exit. | — |
| Break-even if prices do NOT riseRun this version too. It is the honest stress test. | — |
"Rent is money down the drain" and "buying is a trap" are both slogans. The answer depends on four numbers and one question the arithmetic cannot settle.
Because stamp duty, registration and brokerage are substantial, paid upfront and unrecoverable, buying rarely wins over a short stay. This works out the year in which the buyer comes out ahead — and it is the honest answer an agent can give that makes a client trust everything else they say.
What the model does
Each year it runs two households side by side. The buyer pays the EMI and the ownership costs and builds equity as the loan amortises and the property moves. The renter pays rent that rises annually, and invests the money the buyer put down.
At the end of each year it compares net positions, after deducting the cost of selling. The break-even year is the first year the buyer is ahead.
Worked example
₹80 lakh flat, ₹20 lakh down, 8% buying costs, rent ₹24,000 rising 6% a year, appreciation 5%, alternative return 7%. Owning costs roughly ₹52,000 EMI plus ₹6,000 running against ₹24,000 rent — about ₹34,000 a month more, today.
The buyer recovers that through equity and appreciation, and typically overtakes somewhere between years six and nine on these assumptions. Set appreciation to zero and the break-even pushes well past a decade, which is the version worth showing a buyer who is only sure of three years in the city.
The question the numbers do not answer
How much security is worth to them. A tenant can be asked to leave, cannot renovate, and moves with children and schools. For many buyers that has a value no spreadsheet expresses, and it is a legitimate reason to buy even when renting is marginally cheaper.
The agent's honest line: "If you're staying under three years, renting is probably better and I'll tell you that. If you're staying ten, buying likely wins — and here's what it requires." Buyers who hear that come back.
A model, not advice. Appreciation is unknowable and dominates the result — run it at several values.
Questions
What appreciation rate should I use?
Run several, including zero. Anyone quoting a confident long-run number for a specific locality is guessing, and the result is highly sensitive to it — which is itself the most useful thing to show a client.
Why does the model charge a cost to sell?
Because the comparison only means something if the buyer can actually realise the equity. Brokerage and incidental costs on exit are real and are commonly left out of buy-versus-rent arguments.
Does this account for tax benefits on a home loan?
No — deductions depend on the buyer's regime, income and other claims, and the rules change. Treat any tax benefit as upside on top of this, and send them to a chartered accountant.
The number convinces. The reel gets you the call.
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