Live in own house via “Home Loan” or Live in a “Rented” house? What should one look at?


This is a scenario which one goes through while relocating to a new place, mainly to metro cities like Mumbai, Delhi & Bangalore. It’s been everyone’s dream to have their own property, but without any guidance in place, making us feel helpless.

One hand you have hordes of brokers who are ready to show you apartments, where you just have to give them an indication on your budget. On the other hand you have banks offering home loans based on your eligibility & make offers look very attractive.

But both these parties will never ever advice what is good & right, give you a cost benefit analysis, how one should look at buying a property or even renting? Broker makes cool 1% on the purchase transaction. Banks has a spread of 3% to 5% on your interest payment & makes handsome money by lending.

Let’s make our calculations easier to understand:

First & foremost check your finances, two key questions:
How much can you part with your monthly salary?
And how much do you have in hand as lump-sum figure?

On your salary, thumb rule is 50% on the higher side, i.e. if your monthly salary, let’s say is 1lac, one can look at 50k as loan EMI (equated monthly instalment) on the higher side. Provided there are no other EMI’s like personal loan, car loan, credit card outstanding’s& above all, your expenses & other commitments are under 50k or below 50% of your net monthly salary.

With current prevailing rate of 10% to 10.5% interest rate, offered by most of the leading banks, it works out to Rs.965/- per lac EMI per month, for 20 years tenure @ 10%, for a floating rate home loan. Based on above example, on 50K EMI one can look at approx. 52 lacs of home loan lending. Home loan is usually calculated on 80% of the property value, therefore 20% has to come directly as lump-sum, which works out to be 13lacs. Plus add another 4 lacs (approx.), which will go towards stamp duty, registration & brokers commission.

Now the next question: do you have 17 lacs?
If yes, based on above example one can look at buying a property worth 65 lacs.

This becomes your budget, & based on same one can shortlist areas where you are comfortable staying, mainly your travel time to office, Kids school, access to market place & recreation. If in case all these factors make your life cumbersome& hectic, it’s advisable to stay in rented apartment till the time one reaches one’s “Tipping Point”, i.e. where Salary/ EMI, Lump-sum/ Investments & ideal budget, criss-crosses each other.

Disclaimer: This article is based on the understanding & research done by the writer on the subject matter. This is not a complete guide towards home loan calculation. Writer or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this article. The recipients of this article should rely on their own investigations and judgment before making any inference.

Manoj Chahar
Founder & Storyteller at
Manoj is the founder of, with 15 years of corporate experience & expertise in financial markets. Manoj has corporate stints with Kotak Securities, IIFL group & Philips India. He holds an MBA (PGDM) degree from Symbiosis (SIMS) Pune.
His interests include birding & adventure activities.

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