Buy a house or rent and invest in a SIP? A worked example
By Sri Naga Vinay Mutyala · Updated November 2026
The short answer: for a typical Indian city flat, renting and investing the difference in an index fund SIP comes out ahead unless home prices grow faster than about 9.2% a year. Here is the full worked example, with every assumption, so you can see why.
The setup
Two people have the same money. One buys a ₹1 crore flat; the other rents the same flat for ₹30,000 a month and invests instead.
| Flat price | ₹1 crore |
|---|---|
| Rent for the same flat | ₹30,000/month (3.6% of the price a year), rising 5% a year |
| Home loan | 20% down, 8.5% for 20 years: EMI ₹69,426 |
| Stamp duty + registration | 7% (₹7,00,000) |
| Maintenance | 0.5% of the home value a year |
| Renter’s investment | Nifty 50 index fund SIP at 12% a year |
On day 1 the buyer pays ₹27,00,000 (down payment plus stamp duty). The renter invests that same amount. Each month the buyer pays EMI and maintenance, about ₹43,593 more than the rent in year 1, and the renter invests that difference as a SIP. So both spend exactly the same money every month; the only question is what it turns into.
Result after 20 years, by home price growth
| Home price growth | Buyer’s wealth (home, loan repaid) | Renter’s SIP portfolio | Who is ahead |
|---|---|---|---|
| 4% a year | ₹2.19 Cr | ₹5.63 Cr | Rent +₹3.44 Cr |
| 5% a year | ₹2.65 Cr | ₹5.67 Cr | Rent +₹3.01 Cr |
| 6% a year | ₹3.21 Cr | ₹5.71 Cr | Rent +₹2.50 Cr |
| 7% a year | ₹3.87 Cr | ₹5.75 Cr | Rent +₹1.88 Cr |
| 8% a year | ₹4.66 Cr | ₹5.80 Cr | Rent +₹1.14 Cr |
| 9% a year | ₹5.60 Cr | ₹5.85 Cr | Rent +₹24.6 L |
| 10% a year | ₹6.73 Cr | ₹5.91 Cr | Buy +₹81.8 L |
The two end level at about 9.2% a year of price growth. Over 2014–2024, 15 of the 79 localities we track grew faster than that: 8 in Hyderabad, 6 in Bangalore and 1 in Ahmedabad. See the Rent or Buy Index for every locality.
What if the SIP returns less?
Holding home price growth at 7% a year:
| SIP return | Renter’s portfolio | Buyer’s wealth | Who is ahead |
|---|---|---|---|
| 8% a year | ₹3.12 Cr | ₹3.87 Cr | Buy +₹74.7 L |
| 10% a year | ₹4.24 Cr | ₹3.87 Cr | Rent +₹36.6 L |
| 12% a year | ₹5.75 Cr | ₹3.87 Cr | Rent +₹1.88 Cr |
| 14% a year | ₹7.80 Cr | ₹3.87 Cr | Rent +₹3.93 Cr |
The fund return matters as much as the home’s price growth. Equity returns are not guaranteed, and a renter in a bad decade can lose. But a fund at 12% only has to beat a home that also earns you about 3.6% a year in rent saved.
What decides it
- Price growth. The single biggest factor. Each extra point a year changes the result by tens of lakhs over 20 years.
- Rent compared with price. The higher the rent relative to the price (the rental yield), the better buying looks. See our price-to-rent guide.
- Loan rate. A lower rate makes buying cheaper every month.
- Discipline. Rent-and-invest only works if the renter invests the difference every month. EMIs force the buyer to save; nothing forces the renter.
Reasons to buy that aren’t in the numbers
Security of tenure, no landlord, freedom to renovate, and a home that is paid off by retirement are real benefits. If they matter to you, it is reasonable to accept a lower financial return for them. The calculator tells you what that choice costs, so you can decide with your eyes open.
Try it with your own flat →Questions people ask
Is it better to buy a house or invest in SIP in India?
For a ₹1 crore flat renting at ₹30,000 a month, renting and investing in a Nifty 50 index fund SIP wins unless home prices grow faster than about 9.2% a year over 20 years. Above that, buying wins. The answer depends mostly on price growth, the rent you would pay and your loan rate.
Why does renting and investing often win?
Rent is usually only 3–4% of a home’s price a year in Indian cities, while a home loan costs 8.5%. The rent you save does not cover the interest, so the flat’s price has to rise quickly to make up the gap.
Does rent and invest really work in practice?
Only if you actually invest the difference every month and leave it invested. If the money gets spent, buying usually wins because EMIs force you to save.
More guides
- Prepay your home loan or invest the money? Worked example
- Home loan for 20 or 30 years? What the longer tenure really costs
- Price-to-rent ratio in India: what it tells you about buying vs renting
- ₹50 lakh home loan: EMI, total interest and what you really pay
- Home loan EMI calculator
- Rent or Buy Index: verdicts by locality