Today, spending ₹1 crore to buy a good 2-3BHK house in any metro city is not a big deal. If you buy a house worth ₹1 crore, you usually have to make a down payment of 20% of the house price, which is ₹20 lakh. For the remaining ₹80 lakh, you will have to take a home loan.
Let’s do an approximate calculation
Suppose the average interest rate of a home loan is 8.5% and you take this loan for a period of 20 years. According to this, your monthly EMI will be around ₹69,426. In these 20 years, you will pay around ₹86.6 lakh in interest alone. Thus, the total cost of your house will be ₹20 lakh (down payment) + ₹80 lakh (principal) + ₹86.6 lakh (interest) = around ₹1.86 crore.
What will you have after 20 years
If we assume that property prices increase at an average rate of 6% every year, then after 20 years, the value of your ₹1 crore house will increase to around ₹3.21 crore. This means that you spent ₹1.86 crore, and in return, after 20 years, you will have a property worth ₹3.21 crore. This is a solid property investment.
What happens if you stay on rent for 20 years
Now, suppose you rent a property worth ₹1 crore. Initially, you have to pay a monthly rent of ₹40,000. If this rent increases at a rate of 10% every year, then after 20 years, your monthly rent will increase to ₹2.67 lakh. According to this, in 20 years, you will spend a total of around ₹2.75 crore on rent alone.
Buy or rent
However, this decision cannot be taken based only on these figures. Your income, where you live, your job, and your lifestyle all matter in this big decision. Living on rent and buying your own house both have their advantages and disadvantages. For example, living on rent allows you to change houses whenever you want, which is convenient for those who change jobs. On the other hand, buying your own house cannot easily be shifted anywhere unless you sell it. But the comfort and security of having your own house is unmatched.