THIS IS A VIEW-ONLY EXCEL SHEET.

DOWNLOAD THIS SHEET (FILE -> DOWNLOAD AS XLSX) AND THEN USE IT ON YOUR OWN

This sheet has been prepared by Ankur Warikoo, who is NOT a financial advisor :)
So use this sheet with your judgement and not like "this is my final decision"

All cells in green are input cells, which means you have to put in the number
All other cells - ideally you should not touch them. But I have kept them open, so that you can see the formula and how it works

Approach
1. When we rent a house, we pay a monthly rent - which is our expense
2. However, if we buy a house, we pay a upfront down payment plus an interest on the loan amount, which is like a rent (to the bank)
3. So the right way to evaluate is - if I could invest that down payment plus interest amount (above the rent I pay), what would happen?
4. When we buy a house, we have to maintain the place, which costs money
5. However, the house increases in value

So the way to decide whether to buy or to rent, is to compare

Rent: How much am I paying as rent and how much do I earn by investing the down payment amount and the additional monthly interest that I pay to the bank
Buy: How much am I paying as cost of the house and how much do I get if I sell the house later on

NOTE:
Since I am not a financial advisor, there could be some errors in the sheet. If there are, send me an email and I will fix them. Simple :)

Hope you find this useful.

PS:
I bought my house at the age of 40 and I am so happy with the decision.
I think that this around the right age to buy a house (in your 30s). By then you are financially stable, you know where you will be staying, how big a house you want etc
 erest that I pay to the bank

ying, how big a house you want etc

Should you buy a house or rent a house?
Analysis Period 30 years
In that case you should BUY your house

Renting a house - what are the financials? Buying a house - what are the financials?

Monthly Rent? 15,000 Cost of the property

HRA Tax Benefit? 20% Registration %
Effective Monthly Rent 12,000 Registration Amount
Downpayment %
Yearly Rent you will pay 144,000 Downpayment Amount
Avg. yearly rent increase 10% Total upfront amount (incl registration)
Loan Amount
Total rent over the period 23,687,139 Interest rate on loan %
(this amount is not inflation adjusted) Loan Duration in years
EMI per month
This is your expense. But you also gain Tax bracket
if you invest the amount of downpayment Effective Interest Rate %
and also the additional interest you will pay Effection EMI per month
beyond your monthly rent
So this should be added as a benefit to Total Interest over the period
renting a house
Maintenance Amount (% of cost)
Total upfront amount 2,700,000 Maintenance Amount per month
Additional monthly amount Avg. yearly increase %
you can invest 34,814 Total maintenance over the period
Monthly Interest minus rent (which increases every year)
Return you can generate 10% Total cost of buying the house
Cost of house + Interest + maintenance
Value of upfront amount
after the period 47,113,386 The value of the house increases as well eve
Value of monthly amounts Property will increase by what %
after the period 46,995,799 every year
Value of property after this period
Net benefit of renting a house 70,422,046 Adjusted for inflation
Negative Rent amount plus amount you earned
by investing So net benefit of buying a house is
Negative number means you paid more than Value of property minus cost of property, after t
you earned Negative value means, buying a house costs you
a house - what are the financials?

the property 9,000,000

5%
ation Amount 450,000
25%
ayment Amount 2,250,000
pfront amount (incl registration) 2,700,000
6,750,000
rate on loan % 7%
uration in years 20
52,333
20%
e Interest Rate % 6% Tax Rebate (simple assumption)
n EMI per month 46,814

terest over the period 4,485,470

nance Amount (% of cost) 0.5% Usually it is 0.5% annually

nance Amount per month 3,750
arly increase % 5%
aintenance over the period 2,989,748

st of buying the house 16,925,218

ouse + Interest + maintenance

ue of the house increases as well every year

y will increase by what %
8%
f property after this period 90,563,912
for inflation

benefit of buying a house is 73,638,694

property minus cost of property, after the period
e value means, buying a house costs you more in this period
The concept of rental yield is largely not understood

Rental yield is what is the rent amount you will have to pay in a year, compared to the value of the property
In India, this number is between 1-3%

Which means
If you are paying a rent of 180,000 yearly (which is what you have chosen in the other sheet)
And if the rental yield is 3%
Then from this rent, you will be able to afford a house costing approximately 6,000,000
Which is MUCH LESSER than the value of the house you want to buy, right?

So think about it this way

You have a family etc and need a 2 bedroom house
A 2-bedroom house cost atleast 50 lakhs (assume)
Which is a LOT of money
But to just rent a 50 L house, you will have to pay (assuming 2% rental yield) - around 1L in rent, or approx 8,500 per mont
f the property

nt, or approx 8,500 per month