Is renting a mistake? CA warns how rent vs buying a house is a ‘math trap’ as he breaks down the debate

Synopsis

A financial expert challenges the rent-versus-buy debate, suggesting buying might be more advantageous than commonly believed. He argues that while renting requires consistent, disciplined investing of surplus funds, homeownership acts as a forced savings mechanism, building equity through EMIs and offering a more reliable path to wealth accumulation for most individuals.

For years, the rent-versus-buy debate has divided young professionals, investors, and families alike. While renting offers flexibility and buying promises stability, the financial logic behind both choices is often misunderstood. A recent take by CA Nitin Kaushik has reignited the conversation, challenging conventional wisdom and arguing that what looks like a smart, numbers-driven decision on paper may actually work against renters in the long run, especially when real-world behaviour and market trends come into play.

Taking to X, Kaushik described the rent-versus-buy debate as a mathematical trap that tends to favour banks more than tenants. He explained that when evaluating a property worth Rs 2 crore at an interest rate of 7.5 per cent, the required annual appreciation for the property to outperform a renting strategy is around 6.6 per cent. In comparison, a renter would need to consistently invest a monthly surplus of Rs 40,000 at a return of 10 per cent to come out ahead.

On paper, the higher return from investments may appear to be the better option. However, Kaushik pointed out that in reality, many Indian micro-markets have already surpassed the 6.6 per cent appreciation benchmark over the past decade. In several developing hubs, property prices have grown at rates closer to 8 to 10 per cent, making the case for buying stronger than theoretical models might suggest.

A key flaw, according to him, lies not just in the numbers but in human behaviour. The renting model assumes near-perfect financial discipline, where individuals consistently invest their surplus every single month over a period of 15 to 20 years. In practice, this level of consistency is difficult to maintain, with lifestyle changes, emergencies, and spending habits often disrupting long-term investment plans.

In contrast, a home loan acts as a structured and enforced savings mechanism. Every EMI contributes toward building equity, ensuring that wealth creation continues regardless of day-to-day financial decisions. This “forced savings” aspect, Kaushik argued, gives homebuyers an edge, as it removes the dependency on personal discipline and replaces it with a system-driven approach to asset building.

He further emphasised that renting can still work, but only for individuals who are exceptionally disciplined with their finances and capable of maintaining long-term investment consistency without fail. For most people, however, the leverage provided by a mortgage creates a pathway to wealth accumulation that simple savings or inconsistent investing cannot match.

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