How we built this calculator
What the calculator does
The calculator compares two wealth paths over time. Path one: you rent, keep your down payment invested, and invest the monthly difference between what your EMI would have been and your actual rent. Path two: you buy, pay EMI each month, and let your property appreciate. For each year the calculator computes the net worth of both paths and finds the year where the buyer's net worth (property value minus remaining loan balance) first exceeds the renter's net worth (invested down payment plus accumulated monthly savings). That year is the break-even point. At your chosen stay horizon, the difference between the two paths is the wealth gap.
Assumptions and sources
| Assumption | Default | Source / rationale |
|---|---|---|
| Home loan interest rate | 8.5% | SBI published rates for 750+ CIBIL salaried borrowers, April 2026. Mid-range of the 8.25–8.60% band most salaried applicants land in. |
| Annual property appreciation | 7% | Knight Frank India: Kochi prime areas saw 10%+ in 2024–25. We use a conservative long-run estimate to avoid optimism bias. |
| Annual rent hike | 8% | NoBroker H1 2025 report: 7–9% average across major metros. Corroborated by Magicbricks Q3 2025 (18.1% YoY national average). Kochi landlords and tenants report similar numbers at 11-month renewal. |
| Returns on invested savings | 8% | We use 8% as the default. Indian equity indices have historically returned 11–13% over 20+ year periods, but most retail investors don't capture that full return — behavioural gaps, realistic asset allocation (not 100% equity), and tax drag typically bring real-world outcomes closer to 8–9%. Users who invest with high discipline in pure equity index funds can adjust this upward. |
| Down payment | 20% | Standard bank LTV cap. Banks will not lend more than 80% of property value, so 20% down is the minimum to access a home loan. |
| Stamp duty + registration | 10% of property value | Kerala: 8% stamp duty + 2% registration per Kerala Registration Department. Applied as a day-0 sunk cost on the buyer's net worth from year one. |
| Loan tenure | 20 years | Most common tenure for new home loans in India for buyers under 40. |
What the calculator factors in
- EMI computed on monthly reducing balance (standard amortization), held constant over the loan tenure
- Kerala stamp duty + registration (10% of property value) as an upfront sunk cost subtracted from buyer net worth from year 0 onwards
- Compounded annual rent hikes applied each year to the renter's monthly outgo
- Opportunity cost of the down payment: the renter's down payment is assumed invested from day one, compounding annually at the savings return rate
- Monthly savings difference: when rent is below EMI, the renter invests the difference each month; the accumulated pot compounds at the savings return rate
- Compounded property appreciation on the full property value (not just equity) each year
- Remaining loan balance calculated month-by-month via amortization schedule, sampled at year-end
What the calculator does NOT predict
- Future RBI rate cuts or hikes — your EMI could change if you're on a floating rate product and rates move
- Kochi-specific appreciation surges or corrections beyond the percentage you input
- Your individual job stability, family changes, or life events
- Tax benefits under Section 80C (principal repayment up to ₹1.5L/year) and Section 24 (interest deduction up to ₹2L/year) — these favour buying slightly. We've deliberately excluded them to keep the comparison conservative and because tax rules change.
- Maintenance charges, interior fit-out, moving costs, or GST on under-construction property
- Rental deposit opportunity cost (though this favours buying; excluding it makes the renter's position look slightly better than reality)
Sources
- SBI Home Loan Rates — interest rate defaults
- Kerala Registration Department — stamp duty and registration rates
- Knight Frank India Research — Kochi appreciation data
- 99acres Kochi Listings — current market pricing reference
- NoBroker Rental Trends Report — rental inflation data
- Magicbricks Rental Index — Q3 2025 national rental trend data
Update cadence
Reviewed quarterly. Interest rate default updated whenever SBI revises its EBLR. Last updated April 2026.
Who built this
Built by Adithyan Ravikumar and the Afford Homes team. We're a Kochi-based builder, so we have a bias toward buying — which is exactly why we built a calculator that's willing to say "rent." If you think we got something wrong, tell us: info@affordhomesrealty.com