Buy a house worth Rs 1 crore or live on rent? This 20 years of mathematics will change your decision

Knews Desk– Buying your own home is everyone’s dream. Especially in big cities like Mumbai, Delhi, Bengaluru and Pune, people consider the house not just a property but also associated with security and respect. But in today’s time, amidst the rising property prices and expensive home loans, a big question has arisen that is it better to buy a house or is it a more profitable deal to invest that money by staying on rent? To understand the answer to this question, let us look at the complete details of a house worth Rs 1 crore. Suppose you buy a flat worth Rs 1 crore in a big city. For this you will have to pay about 20 percent i.e. Rs 20 lakh as down payment. For the remaining Rs 80 lakh, if you take a 20-year home loan at 8.5 percent interest rate, your monthly EMI will be around Rs 69,400. Now, not only EMI, but expenses like registration, stamp duty, maintenance and property tax are also associated with buying a house. Combining all this, you may have to spend lakhs of rupees extra in the beginning. During 20 years, on a loan of Rs 80 lakh, about Rs 86.5 lakh will have to be paid only as interest. That means a house worth Rs 1 crore will ultimately cost you around Rs 1.66 crore.

Now let us look at the option of living on rent. If the average rent for the same Rs 1 crore house in a big city is Rs 22 thousand to Rs 25 thousand per month, then a person living on rent can save a lot of money. If he pays a rent of Rs 25 thousand, then about Rs 44,400 can be saved every month between his EMI and rent. Apart from this, the down payment of Rs 20 lakh to buy a house can also be invested. If this amount is invested in a good mutual fund for 20 years at 12 percent annual return, it can reach approximately Rs 1.93 crore. At the same time, by saving Rs 44,400 every month through SIP, a fund of about Rs 4.43 crore can be created after 20 years.

In this way, a person investing while living on rent can have an amount of approximately Rs 6.36 crore after 20 years. This amount can be many times more than the price of a house worth Rs 1 crore. However, the mathematics of money alone does not decide the decision of buying a house. Having your own home gives mental peace. You don’t have to worry about the landlord, you can change the house as per your choice and it becomes a permanent place for the future.

The advantage of living on rent is that you can easily change the city according to your job or career. Even in a low budget, you get a chance to live in a good location and your large amount remains invested. The decision of buying a house or living on rent depends on your situation. If your job is stable, you have money for a down payment and you are going to stay in the same city for a long time, then buying a house can be a good decision. But if you are young, there is a possibility of change in career and are disciplined about investing, then investing while living on rent can prove to be more beneficial.