Yesterday, I came across an interesting discussion on Reddit—a professional earning ₹12 lakh a year was stuck in a dilemma: “Should I buy a home or continue renting? It got me thinking—this isn’t just one person’s question; it’s something most young professionals in India struggle with.
We all grow up hearing that owning a home is the ultimate financial goal. But with increasing property prices and EMIs taking up a huge chunk of income, we often ponder if buying is truly a better option or renting.
Let’s break it down step by step, considering real numbers and smart investment choices so that if you’re on a similar income level, you can make the best decision for yourself.
Impact of Union Budget 2025 on Homebuying
One big change affecting the real estate market in 2025 is the new tax structure. The zero tax limit for incomes up to ₹12.75 lakh means young professionals have an estimated extra ₹75,000 saved annually—which could either be used for a home loan or smart investments.
How does this help?
- You can afford properties ₹6-7 lakh higher than before.
- If you’re applying with a co-borrower (spouse, parent, sibling), your homebuying capacity jumps by ₹12-14 lakh.
- More savings = larger down payment = lower EMIs.
But should you take the plunge? Let’s crunch some facts.
Understanding Your Finances
A salary of ₹12 lakh per year translates to ₹1 lakh per month and under the new tax regime, there is no deduction on this income. This means a full take-home salary of ₹1 lakh per month.
- Fixed Expenses: Rent/EMI, utilities, groceries, transportation.
- Variable Expenses: Dining out, travel, entertainment.
- Savings & Investments: SIPs, stocks, emergency funds.
Before making a buying decision, ensure that you have a solid emergency fund, minimal high-interest debts (like credit card dues) and a clear financial goal.
The Cost of Renting vs. Buying
The decision to rent or buy is heavily influenced by where you live. Property prices, rental yields and cost-of-living expenses vary widely between metro cities like Mumbai and Bengaluru versus Tier-2 or Tier-3 cities like Indore or Jaipur.
- Metro Cities (Mumbai, Delhi, Bengaluru, Hyderabad, Pune, Chennai)
- Tier-2 and Tier-3 Cities (Indore, Jaipur, Lucknow, Coimbatore, Nagpur, Bhopal, Surat, Chandigarh)
Can You Afford a Down Payment?
If you earn ₹12 lakh per annum, saving for a down payment is crucial. Here’s a location-wise breakdown:
- Metro City Scenario (Buying a ₹1 crore apartment)
- Tier-2 City Scenario (Buying a ₹45 lakh apartment)
The 30% Rule Financial experts suggest that your total housing expenses (EMI + maintenance) should not exceed 30% of your monthly income.
- ₹12 lakh salary = ₹1 lakh per month
- Ideal EMI range: ₹30,000 - ₹35,000/month
But let’s say you’re buying a 2 BHK apartment of ₹70 lakh in a metro city like Bengaluru. Here’s what it would look like:
Rahul's Scenario (Buying a Home in Bangalore)
- Earns ₹12 lakh/year
- Buys a ₹70 lakh 2 BHK
- Down Payment (20%): ₹14 lakh
- Loan Amount: ₹56 lakh
- Pays approx ₹46,800 EMI + ₹5,000 maintenance
- Total monthly housing expense approx ₹51,800
- Remaining for other expenses: ₹32,200
✅ Pros: Builds an asset, tax benefits, no rent hikes
❌ Cons: High EMI burden, limited financial flexibility
Priya (Rents a Home in Bangalore)
- Earns ₹12 lakh/year
- Rents a 2BHK for ₹40,000/month
- Saves and invests ₹10,000/month in mutual funds
- Remaining for other expenses: ₹50,000
✅ Pros: More financial freedom, higher investment returns, job mobility
❌ Cons: No property ownership, risk of rent hikes
💡Key Takeaway:
If you earn ₹12 lakh per year, renting makes more financial sense in metro cities. Priya has ₹50,000 left after rent, while Rahul has only ₹32,200 after his EMI and maintenance costs.
Moreover, Priya invests ₹10,000 per month, which at 12% annual returns, could outgrow Rahul’s property appreciation over 20 years. Plus, she has the flexibility to switch jobs—something Rahul lacks due to his EMI commitment.
Ultimately, the decision to rent or buy should be based on individual financial circumstances, long-term plans and personal preferences.
Smart Investment Alternatives to Homebuying for a ₹12 LPA Income
If you're unsure about buying, here are some alternative ways to invest in real estate without committing to a full-fledged home loan:
➡️Fractional Real Estate Investment
It allows you to own a portion of a high-value property along with other investors. This concept is gaining popularity in India as it provides access to premium real estate assets without the burden of a full-fledged home loan.
How It Works:
- Multiple investors pool money to buy a commercial or residential property.
- Each investor gets fractional ownership and earns rental income proportional to their share.
- The asset is managed by a professional real estate management firm.
- Upon selling the property, investors receive their share of the capital appreciation.
✅Pros:
- Lower investment requirement (starting from ₹5-10 lakh).
- Passive income through rental yields (typically 8-12% per annum).
- Portfolio diversification without the risks of full property ownership.
❌Cons:
- Limited liquidity – selling a fractional share can take time.
- No personal use of the property.
➡️REITs (Real Estate Investment Trusts)
REITs are publicly listed entities that own and manage income-generating real estate properties, such as office buildings, malls, and hotels. Investors can buy shares in a REIT just like they buy stocks and earn a share of rental income and capital appreciation.
How It Works:
- REITs collect funds from multiple investors and invest in commercial real estate.
- They generate income primarily through rent and distribute dividends to investors.
- REITs are listed on stock exchanges, which offer high liquidity compared to direct real estate investments.
✅Pros:
- Minimum investment as low as ₹10,000-15,000.
- Regular dividend income (mandated to distribute at least 90% of rental earnings).
- No need for property management or maintenance.
- Easy to buy and sell on stock exchanges.
❌Cons:
- Subject to market fluctuations like stocks.
- Returns can be lower than direct real estate investments in high-growth areas.
➡️Rent-to-Own Model
Rent-to-own (or lease-to-own) agreements allow tenants to rent a property with the option to buy it later, typically within 3-5 years. A portion of the rent paid goes towards the future down payment.
How It Works:
- A tenant signs a lease agreement with an option to purchase the home at a pre-agreed price after a certain period.
- The agreement may include an option fee (1-5% of the home’s price), which is credited toward the purchase if the tenant decides to buy.
- Monthly rent is often slightly higher than market rates with a portion allocated to the eventual down payment.
- At the end of the lease, a renter can either buy a home or walk away (though this extra option fee is usually non-refundable).
✅Pros:
- Live in the property before committing to buying.
- No need for a large down payment upfront.
❌Cons:
- Higher rental costs than standard leases.
- If you choose not to buy, the extra payments are lost.
- Limited availability in India—more common in areas like Mumbai, Bangalore, and Delhi.
Final Verdict: Should You Buy or Rent?
At the end of the day, it all boils down to your financial goals, career plans and lifestyle preferences.
Ask Yourself These Questions:
✅ Do I have enough savings for a down payment + emergency fund?
✅ Can I afford EMIs without compromising my financial stability?
✅ Will I stay in the same city for the next 5-10 years?
✅ Am I comfortable with property maintenance and taxes?
If most of your answers are yes, then buying a home with a similar salary package could be a smart move. But if not, then renting (and investing the difference) will be the wiser financial decision.
At the end of the day, the Rent vs. Buy decision isn’t just about finances—it’s about your lifestyle, goals and long-term plans. Renting gives you flexibility, while buying builds equity but both come with their own set of trade-offs.
There’s no one-size-fits-all answer, but understanding the real costs, hidden pitfalls, and potential benefits can help you make the right choice. What’s your take? Share your thoughts and join the conversation on our LinkedIn page!
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