Buying Vs Renting a Flat: There has been a record increase in property prices in the last few years. Due to this, the price of a 3BHK flat in any good location in Delhi-NCR has become more than Rs 1 crore. If we talk about Gurugram, the price there is even higher. In such a situation, the big question is whether it is right for a working person or a lower middle class person to buy a house worth crores of rupees or will it be beneficial to live on rent? We are telling you through calculations why paying Rs 25,000 monthly rent would be a better decision than buying a flat worth Rs 1 crore.
Let’s understand with this example:-
A 3BHK flat at any location in NCR, whose size is 1200 square feet. The rate per square feet in that project is Rs 10,000, so the price of that flat becomes 1.2 crores. If you buy that flat by making a 20% down payment, then you will take a loan of about 1 crore rupees from the bank. For this loan, you will have to pay 89,973 monthly EMI. The complete calculation of home loan is given below.
| Home Loan Amount | Rs 1,00,00,000 |
| Loan EMI | ₹89,973 |
| Total Interest | ₹1,15,93,423 |
| Total payment in 20 years (Principal + Interest) | ₹2,15,93,423 |
That means if you take a home loan of Rs 1 crore, you will pay more than Rs 2.15 crore to the bank.
Now let us understand how the rent of Rs 25 thousand is beneficial:-
If you buy a 2BHK flat on monthly rent of Rs 25,000, you will pay Rs 3,00,000 in a year. If the landlord increases the rent by 10% next year, you will pay Rs 3,30,000 that year. In this way, if your rent increases by 10% every year, you will pay Rs 1,7,182,596 as rent in 20 years.
| Year | Annual Rent (with 10% escalation) |
| 1 | Rs 300000 |
| 2 | Rs 330000 |
| 3 | Rs 363000 |
| 4 | Rs 399300 |
| 5 | Rs 439236 |
| 6 | Rs 483156 |
| 7 | Rs 531468 |
| 8 | Rs 584616 |
| 9 | Rs 643080 |
| 10 | Rs 707388 |
| 11 | Rs 778128 |
| 12 | Rs 855936 |
| 13 | Rs 941532 |
| 14 | Rs 1035684 |
| 15 | Rs 1139256 |
| 16 | Rs 1253184 |
| 17 | Rs 1378500 |
| 18 | Rs 1516356 |
| 19 | Rs 1667988 |
| 20 | Rs 1834788 |
Total rent in 20 years will pay: Rs 1,7,182,596
Start a SIP along with the rent
Now if you start paying rent of Rs 25,000 and start a monthly SIP of just Rs 25,000, you will easily accumulate Rs 2,49,78,698 in the next 20 years. Despite this, you will be saved from the burden of heavy EMIs. You can use the money you get after 20 years to educate your children and plan for retirement. By doing this, you can not only reduce the burden of EMI but can also easily secure your future.
One question that may arise in your mind is that the price of property will also increase in 20 years! Yes, it will definitely increase but it will not increase as much as the returns you will get. The biggest advantage of living on rent will be that you will be able to invest with your income. You will not be stuck in paying only the EMI of the home loan.
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