Price-to-Rent Ratio Calculator

What the price-to-rent ratio decides

The price-to-rent ratio is the classic yardstick for the question almost every household faces: should I buy or keep renting? It divides a property’s price by the annual rent for an equivalent home, expressing the purchase price as a multiple of a year’s rent. A ratio of 20 means the home costs twenty years of rent; a ratio of 12 means twelve. Because a lower ratio means buying is cheap relative to renting, the number offers an immediate, intuitive read on which option makes more financial sense in a given market.

The rule of thumb

A widely used guideline reads the ratio in three bands. Below 15, buying tends to be the more economical choice — the price is low enough relative to rent that ownership pays off reasonably quickly. Above 20, renting usually wins on pure cash flow, because the price has run far ahead of what the same home rents for. Between 15 and 20 sits a grey zone where the maths is finely balanced and other factors — how long you will stay, expected appreciation, the emotional value of owning — tip the decision. These thresholds are signposts, not laws, and they matter most when you compare like with like.

Why Indian metros skew high

Anyone running this calculation in Mumbai, Delhi or Bengaluru will often see ratios well above 20, sometimes 30 to 50 in prime areas. That is because property prices in India’s big cities have risen much faster than rents over the past two decades, stretching the multiple. On the raw numbers, renting is frequently cheaper in these markets — yet millions still buy, drawn by the security of ownership, the discipline of building an asset, and the hope of appreciation. The ratio does not capture those motives; it captures only the present-day cash comparison, which is exactly why it is a starting point rather than a verdict.

Looking past the single number

The ratio’s simplicity is also its limit. It ignores the interest you would pay on a home loan, the opportunity cost of locking a large down payment into property instead of investing it, stamp duty and registration, ongoing maintenance and society charges, and — crucially — future appreciation, which can flip the entire calculation for a long enough hold. Use the ratio to get your bearings and to compare neighbourhoods quickly, then build a fuller cash-flow comparison that layers in financing, costs and a realistic appreciation assumption before you make one of the largest financial decisions of your life.