Rent or buy? This in-depth guide will help you decide.

Whether to rent or buy is a big decision for most. What’s best for you depends on your financial situation, life goals, and local housing market. Ask yourself these questions to make a better decision:

• Can I afford the entire cost of buying a house, including the down payment, taxes and maintenance?
• What is the backup plan if home loan interest rates increase suddenly, or if I lose my job?
• Am I going to live in this neighbourhood for a long period (more than five years)?

Early home ownership versus renting

It is vital to weigh the pros and cons of early home ownership vs renting listed below, especially if you’re an urban professional in your 20s or 30s.

Pros of early home ownership



• Each EMI payment helps build ownership in your home, unlike rent, which is a pure expense.
• There’s potential for the property’s value to appreciate, especially in developing areas.
• If you choose a fixed-rate home loan, your EMI remains stable over time, while rent typically increases annually.
• Home buyers are eligible for tax deductions on both the principal repayment and interest under sections 80C and 24(b) of the Income Tax Act.
• There’s a deep sense of emotional satisfaction in owning your own home and having the freedom to personalise it.

Cons of early home ownership

• Buying a home requires a substantial upfront investment that includes the down payment, registration fees, furnishing, and moving expenses.
• Once you buy, relocating for better job opportunities or lifestyle reasons becomes more complicated.
• There are ongoing expenses for repairs, society maintenance, and general upkeep.
• Home loans also require a long-term financial commitment—often up to 20 years—which can strain cash flow, particularly early on in your career.
• There’s always the risk that the property’s value doesn’t appreciate significantly.


Pros of renting


• Renting offers flexibility—whether it’s moving to a new city or upsizing or downsizing based on changing needs.
• The initial costs are far lower, usually limited to a security deposit equivalent to two or three months’ rent.
• Major maintenance and repair work is generally the landlord’s responsibility, saving you time and expense.
• Renting also allows you to live in premium localities where you may not be able to afford to a buy a home.
• It preserves liquidity, which you can invest in higher-return assets such as mutual funds or direct stocks.

Cons of renting

• The biggest drawback of renting is the lack of equity creation—you are effectively paying off someone else’s mortgage.
• Rent often increases annually, sometimes unpredictably.
• There’s also the insecurity around the tenure—your landlord might choose to sell the property or not renew the lease.
• Renters usually face restrictions on having pets, inviting guests, or making decorative or structural changes.
• Renters also miss out on the extensive tax benefits available to homeowners, barring the house rent allowance (HRA) exemption, if applicable.

The middle ground

If you’re uncertain about buying property right now, you don’t have to choose between the two extremes. A smart middle path could be to rent a modest home while simultaneously investing towards the down payment of a future property. Systematic investments in mutual funds can help you accumulate capital while renting gives you the flexibility to explore locations and better understand the real estate landscape.

You can rent a reasonably priced home, invest in mutual funds to build a down payment, and track the real estate market in preferred areas.

Ultimately, the decision to rent or buy should be tailored to your individual circumstances. By assessing your current financial readiness and long-term goals, you can make a choice that supports both your lifestyle and wealth-building journey.

When renting makes more sense

Renting can be the better choice in several situations. If you are not in a position to make a down payment of at least 15% to 20% of the property’s cost, it may be wiser to wait and save more before committing. A credit score below 700 may result in higher loan interest rates, significantly increasing the cost of home ownership.

Also, if your emergency savings are inadequate (ideally, one should have at least six months’ worth of expenses saved) buying a home may not be financially safe. Renting is also a more flexible choice if your job or city of residence is likely to change, or if the property prices and interest rates in your chosen area are prohibitively high. Many people also prefer to rent in a locality first to assess its liveability before buying property there.

When you don’t have a huge home loan burden, you save and invest more to achieve other significant financial goals.

When buying makes more sense

You can consider buying a home when you have saved enough for the down payment and have additional funds for expenses such as registration, interiors, shifting, and other incidental costs. If you’re being offered a home loan at a favourable interest rate and have a stable job, you’re well-placed to buy a home.

A long-term commitment to the location is crucial. Buying is better if you’re planning to stay in the same area for several years, and if your motivation is long-term investment rather than short-term gratification.

If your monthly rent is comparable to the expected EMI, it may make more sense to build equity in your own asset rather than continue paying rent. First-time homebuyers also stand to benefit from government schemes such as PMAY and stamp-duty concessions.

Raj Khosla is founder and managing director of MyMoneyMantra.com