Is it better to rent or buy a house?

It depends on how fast house prices grow where you live, which nobody knows in advance. What can be worked out is the growth rate buying would need in order to win, and then compared against what official indices actually recorded. On a Rs 60 lakh Indian flat with a 20% deposit at 8.5%, held ten years, that hurdle is 6.9% a year against the 4.2% the Reserve Bank of India recorded. On a $400,000 US home with 20% down at 6.67%, held ten years, it is 3.53% against the 2.2% the FHFA index recorded. On the published numbers, renting and investing the difference ends ahead in both countries, though a fast-growing city can beat the national figure by a wide margin.

How fast are house prices actually growing?

In India, the Reserve Bank of India's House Price Index recorded 4.2% year-on-year in the fourth quarter of FY 2025-26 across eighteen cities, and the National Housing Bank's RESIDEX recorded 4.5% across fifty. In the US, the FHFA purchase-only index recorded 2.2% for the year to May 2026 and the S&P Cotality Case-Shiller national index recorded 1.1%. All four were published in mid-2026. National figures hide enormous spread: NHB reported growth from 22.2% in Ludhiana to a decline of 4.3% in Delhi, with six of fifty cities falling.

Did Robert Shiller find that houses appreciate only 0.2% a year?

No. Shiller published a historical data series going back to 1890, not a percentage, and his data file states no appreciation rate anywhere. The 0.2% figure is third-party arithmetic on his index, and it is what the series gives if you stop measuring in the year 2000. The same series run to 2026 gives 0.56% a year in real terms, and run from 1991 it gives 1.65%, which independently matches the 1.64% you get from the FHFA index deflated by consumer prices. A Philadelphia Fed working paper published in 2024 also argues the series understates growth before 1987, finding real prices grew 142% between 1890 and 1987 against just 37% in the Shiller index.

Why does property tax matter so much in a US rent versus buy decision?

Because it is a permanent running cost proportional to the value of the home, and it varies enormously by state. The US national effective rate is 0.91% of value, but it runs from 0.32% in Hawaii to 1.83% in Illinois according to Tax Foundation figures for 2023. On an identical $400,000 house with an identical loan, that difference alone moves the growth rate buying needs from 2.72% to 4.77%. No other input on a rent versus buy calculator has that much influence, and many calculators leave it out entirely.

What is the price-to-rent ratio and what does it tell you?

The price-to-rent ratio is the purchase price of a home divided by one year of rent for a comparable home. A Rs 60 lakh flat renting at Rs 20,000 a month gives a ratio of 25. It is useful for comparing two neighbourhoods on the same scale, because it strips out the absolute price level. What it cannot do is settle the decision, because it ignores your loan rate, your holding period, purchase taxes, property tax and what your money would earn invested instead. The cut-offs usually quoted alongside it are convention rather than research findings.

Saving Money

Rent vs Buy: The Growth Rate Buying Actually Needs

Q: What is the rental yield in Indian cities?

No official Indian source publishes one. RBI and the National Housing Bank both stop at price indices and neither computes a yield. Searches of Knight Frank India's research pages, Anarock's site and Anarock's own Q1 2026 residential market report returned no occurrence of the term. The yield figures circulating online come from property portals calculating them from asking rents against listing prices, which measures what landlords and sellers hope for rather than what transactions settle at.

Educational content only, not financial advice

By Tapabrata Biswas · Published August 18, 2026 · 14 min read

Researched with AI assistance, reviewed and edited by Tapabrata Biswas.

A rented home and a purchased home side by side with a house price index chart between them showing the growth rate buying needs to win

Key takeaways

Buying has to clear a hurdle rate, and it is calculable. On a Rs 60 lakh Indian flat held ten years the hurdle is 6.9% a year; on a $400,000 US home it is 3.53%. The Reserve Bank of India recorded 4.2% and the FHFA index recorded 2.2%, so on the published figures renting and investing wins in both countries.
In India's first ten years the interest alone comes to Rs 35,58,365, more than the entire Rs 33,15,948 rent bill over the same decade.
US property tax swings the answer more than any other input. The same house needs 2.72% growth to justify buying in Hawaii and 4.77% in Illinois, purely because effective rates run from 0.32% to 1.83%.
Robert Shiller never published the famous 0.2% figure. He published a data series, and 0.2% is what it gives if you stop measuring in 2000. Run the same series to 2026 and it gives 0.56%; run it from 1991 and it gives 1.65%.
On Shiller's own index, US real house prices in 1940 were still below where they stood in 1890, fifty years on.

Ask whether to rent or buy and you will get an answer within seconds. Ask why, and it falls apart.

Every rent versus buy calculator rests on one number nobody knows: how fast the home will grow in value. Twenty-seven of them were read for this piece, fifteen Indian and twelve American. All twenty-seven take that number as an input, produce a verdict, and present it with a confidence the input does not support.

So this works the other way round. Rather than guess at the growth rate and hand you a verdict, it solves for the growth rate buying would actually need, then puts that against what the official indices published.

What growth rate does buying actually need?

The flip point is the yearly house price growth rate at which buying finally catches renting and investing the difference. It is the hurdle a purchase has to clear, and it is the same idea in both countries.

Take a Rs 60,00,000 Indian flat. Twenty per cent down, a Rs 48,00,000 loan at 8.5% over twenty years, an EMI of Rs 41,656. Stamp duty at 5% adds Rs 3,00,000, and because that cannot go into the loan the cash needed on day one is Rs 15,00,000. Rent the same flat at Rs 20,000 a month rising 7% a year, and the renter invests what they did not spend. Hold ten years and the flip point is 6.9% a year.

Now a $400,000 American home. Twenty per cent down, a $320,000 mortgage at 6.67% over thirty years. Closing costs at 2.18%, property tax at the national effective rate of 0.91% a year, upkeep at 1%, rent at $2,000 rising 2.9%. Hold ten years and the flip point is 3.53% a year.

Two very different markets, one shared question: do you expect homes where you live to grow faster than that, every year, for a decade?

What did house prices actually do?

The Reserve Bank of India recorded 4.2% and the FHFA recorded 2.2%. Neither reaches its country's flip point.

Index	Country	Latest reading	Covers
RBI House Price Index	India	4.2% (Q4 FY 2025-26)	18 cities, base 2022-23
NHB RESIDEX	India	4.5% (Q4 FY 2025-26)	50 cities
FHFA purchase-only, seasonally adjusted	US	2.2% (year to May 2026)	national
S&P Cotality Case-Shiller, national	US	1.1% (year to May 2026)	national

Each country runs two official indices that disagree with each other. India's gap is small, three-tenths of a point, and comes from method: RBI reads registration data, so prices people actually paid, while NHB reads valuations by banks and housing finance companies. The American gap is proportionally larger, with FHFA reading twice what Case-Shiller does.

A trap worth knowing if you go looking: Case-Shiller was renamed S&P Cotality after CoreLogic's rebrand, and its 10-city (2.4%) and 20-city (1.6%) readings differ materially from the national 1.1%. Most news coverage quotes the 20-city figure without saying so.

The national averages also hide the part that decides your answer. NHB's spread ran from 22.2% in Ludhiana down to a decline of 4.3% in Delhi, and six of the fifty cities fell over the year. Mumbai managed 4.5%. Pune managed 2.9%.

A flat in Ludhiana cleared the Indian hurdle three times over. A flat in Delhi lost money while its owner paid interest on it. The national average describes neither.

Why do the calculators disagree with each other?

Because they quietly assume different growth rates, and almost none explain why.

Indian tools cluster between 5% and 7%, above both official indices. American ones spread wider: Freddie Mac defaults to 0.00%, mortgagecalculator.org to 5%, NerdWallet to 4.5%, calculator.net to 3%.

That last one is worth dwelling on, because a single page manages to say three incompatible things. Its text states that Shiller's study "found that the average appreciation rate for home prices after adjusting for inflation came to only 0.2%." Elsewhere the same page says homes appreciate "by about 3-5% a year." And its underlying HTML carries value="3" as the calculator's default.

Three numbers, one page, no reconciliation. These defaults are placeholders, not forecasts, and they are also the single input that decides the answer.

What about that famous 0.2% figure?

Robert Shiller never published it. He published a data series, and every 0.2% in circulation is somebody else's arithmetic on it.

His historical index, which accompanies Irrational Exuberance and now lives at shillerdata.com, runs from 1890 and is updated monthly. The file contains no appreciation rate anywhere. So there is no "Shiller found 0.2%" to cite, only a series that different people have measured over different windows.

And the window is the whole story:

Measured from 1890 to	Real growth a year
1975	0.04%
2000	0.216%
2004	0.427%
2026	0.559%

The famous 0.2% is simply what his series gives if you stop in the year 2000. The other figure in circulation, 0.4%, is the same series stopped in 2004. Both are real, and they differ only by end date.

Run that same series from 1991 to today and it gives 1.65% a year in real terms. Which matters, because the FHFA index deflated by consumer prices over the same window gives 1.64%. Two different datasets, agreeing to two decimal places. The eight-fold gap between "0.2%" and "1.6%" is entirely measurement window and not methodology at all.

There is also a serious challenge to the old part of the series. A Philadelphia Fed working paper published in 2024 rebuilt US house prices from 2.7 million digitised newspaper listings and found "real sales prices grew 142% between 1890 and 1987 compared with just 37% in the Shiller index." The same authors report their series "aligns very closely" with Shiller's from 1987 onward, so the dispute is entirely about the pre-1987 data.

What survives all of this is a fact more useful than the percentage ever was. On Shiller's own index, US real house prices in 1940 stood below where they were in 1890. Fifty years, and the real value had gone backwards. That is the thing the 0.2% figure is fumbling towards, and it holds up where the number does not.

Why property tax decides the American answer

Property tax is the input that moves a US rent versus buy result more than any other, and many calculators omit it. It is a permanent charge proportional to the value of the home, it never amortises away like interest, and it varies by state more than most buyers expect.

The US national effective rate is 0.91% of value. The range around it is enormous:

State	Effective property tax	Flip point on the same $400,000 house
Hawaii	0.32%	2.72%
Alabama	0.36%	2.78%
Colorado	0.50%	2.97%
US national	0.91%	3.53%
Texas	1.36%	4.14%
New Jersey	1.77%	4.69%
Illinois	1.83%	4.77%

Identical house, identical loan, identical rent. Two full percentage points of difference in what buying has to achieve, from one line on a tax bill.

Set that against the 2.2% FHFA recorded. In Hawaii the hurdle is 2.72%, close enough that the decision is genuinely open. In Illinois it is 4.77%, more than double what the national index delivered. Same country, opposite conclusions.

Mortgage insurance is the other American cost that skews things, and it has a rule worth knowing. Under the Homeowners Protection Act it applies only above 80% loan-to-value, and it must terminate automatically once the balance reaches 78% of the original value, not of a revalued home. Rising prices do not end it early. No government source publishes a rate for it, incidentally: the Consumer Financial Protection Bureau has three pages on mortgage insurance and none states a cost.

What does the first decade of ownership cost?

Interest, not principal, is what a buyer pays for in the early years. On the Indian example, of the Rs 49,98,662 in EMIs paid over the first ten years, Rs 35,58,365 is interest and only Rs 14,40,297 comes off the principal.

Set that against the renter's outlay. At Rs 20,000 a month rising 7% a year, the renter pays Rs 33,15,948 in rent across the decade.

The interest alone is larger than the entire rent bill.

That does not settle anything by itself, because the buyer ends the decade owning a Rs 90,53,749 asset while the renter owns an investment account. It does explain why the gap takes so long to close. Add upkeep at 1% of value a year, Rs 7,27,083 over the decade, and owning pulls further ahead on running cost before the asset side catches up.

Run both paths to the end of year ten at RBI's 4.2% and the buyer nets Rs 55,12,970 after selling costs and the outstanding Rs 33,59,703 loan, while the renter ends with Rs 79,66,655. Renting is ahead by about Rs 24,50,000. On the US defaults the same comparison gives $199,951 against $258,642, with renting ahead by $58,692.

What does the price-to-rent ratio measure?

The price-to-rent ratio is the purchase price of a home divided by one year of rent for a comparable home. The Rs 60,00,000 flat at Rs 20,000 a month gives a ratio of 25.

It is a genuinely useful comparison tool. Because it strips out the absolute price level, it lets you hold two neighbourhoods side by side, and a ratio of 18 in one suburb against 34 in another says something real about how differently they are priced.

What it cannot do is decide anything. It knows nothing about your loan rate, holding period, stamp duty, property tax, or what your money would earn invested instead. Two buyers facing an identical ratio of 25 get opposite answers if one borrows at 8.5% and the other pays cash.

The thresholds quoted alongside it deserve the same scepticism as the appreciation defaults. Cut-offs like "under 15 favours buying" are conventions that circulated into repetition, not findings.

Why is there no official rental yield in India?

Gross rental yield is annual rent divided by property price, and no Indian government or industry body publishes one. RBI and the National Housing Bank both stop at price indices. Neither computes a yield.

Searches of Knight Frank India's research pages, Anarock's site and Anarock's own Q1 2026 residential market report returned no occurrence of the term either. The consultancies that dominate Indian property research publish absorption, launches and price movement, and leave yield alone.

So the yield figures circulating online come from property portals, calculating them from asking rents against listing prices. Both sides of that fraction are advertisements. Any comparison that derives your rent from a yield assumption is building on that. Using the rent you actually pay avoids the problem.

What buying costs before you own anything

In India, stamp duty is the charge most first-time buyers underestimate, partly because it cannot be borrowed. RBI's Directions exclude stamp duty, registration and documentation charges from the property value a lender may lend against, which makes the whole amount cash on the day.

State	Stamp duty on a sale deed	Registration fee
Maharashtra	5% inside municipal corporation limits, 4% in a gram panchayat area, with 1 percentage point off for women buyers	1%, capped at Rs 30,000
Karnataka	5%, plus an additional 10% of that duty as an infrastructure surcharge under section 3B	Revised upward from 31 August 2025
Delhi	6% for a male buyer, 4% for a female buyer, inclusive of transfer duty	1% plus Rs 100 pasting charge
Tamil Nadu	7% on market value	2% on market value

On the Rs 60,00,000 flat that is Rs 2,40,000 in Delhi for a woman buyer against Rs 4,20,000 in Tamil Nadu, before registration.

The American equivalent is closing costs, and the published figures measure different things. Fannie Mae puts median closing costs net of credits at 2.18% of price, which includes prepaid taxes and insurance. The Consumer Financial Protection Bureau reports a median of $6,684 in total loan costs, which excludes those but includes discount points, paid by 56.6% of buyers at a median of $3,000. The two are not comparable and should not be averaged.

Selling costs are unsettled in the US right now. Since the National Association of Realtors settlement took effect on 17 August 2024, offers of buyer-agent compensation are banned from the MLS and commissions must be disclosed as negotiable. No source publishes a credible combined commission for 2025-26. The verified buyer-side leg alone averaged 2.42% in the third quarter of 2025.

What this post deliberately does not cover

It does not tell you whether to rent or buy. The arithmetic here covers money, and the decision is usually not only about money. Security of tenure matters, so does the freedom to move for work, so does what a home means inside a family. None of that appears in these numbers and none should be dismissed for being hard to quantify.

Capital gains tax is not modelled on either side, and neither are the home loan or mortgage tax reliefs. In India those are unavailable on a self-occupied property under the default tax regime anyway, which removes much of the tax reasoning attached to Indian home buying.

The investment return is an assumption about markets, not a promise. What is realistic for your own money is a conversation for a SEBI-registered investment adviser in India or a licensed financial adviser in the US, and anything touching tax is one for a chartered accountant or CPA.

The rent vs buy calculator runs the comparison on your own figures in either country and shows your flip point. For the borrowing side of an Indian purchase, the home loan EMI calculator applies the RBI lending ceiling and totals the cash needed on the day. How to save for a house down payment covers reaching the deposit, and if the flat is still being built, pre-EMI against full EMI covers what the wait costs.

Sources

Reserve Bank of India, All-India House Price Index for Q4:2025-26, released 29 May 2026: 4.2% year-on-year, index 115.9, base 2022-23, eighteen cities
National Housing Bank, NHB RESIDEX for Q4 FY 2025-26: 4.5% across fifty cities, from 22.2% in Ludhiana to a decline of 4.3% in Delhi, six cities declining
Federal Housing Finance Agency, House Price Index, purchase-only seasonally adjusted, May 2026 data released 28 July 2026: 2.2% year-on-year. FHFA publishes no long-run average; the 1991-2026 figures quoted here are our own calculation from its published series
S&P Cotality Case-Shiller Home Price Indices, May 2026 data released 28 July 2026: national index 1.1% year-on-year, 10-city 2.4%, 20-city 1.6%
Robert J. Shiller, historical US home price series accompanying Irrational Exuberance (3rd edition, Princeton University Press, 2015, updated by the author), annual from 1890. The growth rates quoted here are our own calculation from that series; Shiller publishes no rate
Lyons, Shertzer, Gray and Agorastos, The Price of Housing in the United States, 1890-2006, Federal Reserve Bank of Philadelphia Working Paper 24-12, June 2024, revised October 2025
Tax Foundation, Facts & Figures 2025, Table 33, property taxes paid as a percentage of owner-occupied housing value, calendar year 2023, computed from US Census Bureau American Community Survey data
US Bureau of Labor Statistics, Consumer Price Index, rent of primary residence, 2.9% for the twelve months to July 2026
Consumer Financial Protection Bureau, when you can remove private mortgage insurance, and 12 U.S.C. section 4901, for the 80% and 78% thresholds against original value
Consumer Financial Protection Bureau, Data Point: 2023 Mortgage Market Activity and Trends, December 2024, for the $6,684 median total loan costs
Fannie Mae, Barriers to Entry, December 2021, for median closing costs net of credits at 2.18% of sale price on 2020 data
National Association of Realtors, settlement agreement filed 19 April 2024 in Burnett et al. v. National Association of Realtors, practice changes effective 17 August 2024
Revenue Department, Government of NCT of Delhi, property registration charges
Department of Registration and Stamps, Government of Maharashtra, Maharashtra Stamp Act Schedule I, Article 25(b)
Department of Stamps and Registration, Government of Karnataka, Karnataka Stamp Act 1957, Schedule Article 20(1) and section 3B
Registration Department, Government of Tamil Nadu, Duty and Fees on the TNREGINET portal
Observations on how other rent versus buy calculators present assumptions and defaults come from a live review of fifteen India pages and twelve US pages on 18 August 2026, reading served markup and calculator scripts

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