Ask a Dhaka renter whether buying is better and you will hear a confident answer. Ask a homeowner the same question and you will hear the opposite, just as confidently. Both may be right — for their own circumstances. The question that actually matters is narrower and more useful: after how many years does buying start to cost less, in total, than renting an equivalent home?
This article works through the method with a clearly-labelled illustration. It is not a prediction about any particular flat, area or household, and it is not financial advice. Its purpose is to show readers how to run the comparison for themselves — and which inputs deserve the most attention.
What the comparison must include
A fair comparison counts everything, on both sides, over the same period. On the renting side, the main cost is rent itself, which in Dhaka typically rises over time, though not evenly and not every year. Renters also pay moving costs when they change homes, and they earn a return — or at least avoid a cost — on the money they did not spend on a down payment and purchase costs. That money, if saved or invested, has a value that must be counted, or the comparison flatters buying.
On the buying side, the costs are broader than the monthly instalment. They include the down payment and purchase costs paid at the start, the loan instalment (of which only part repays the principal; the rest is interest), maintenance, repairs and service charges, property-related taxes and fees, and the cost of selling if the flat is eventually sold. What buying gives back is equity: the part of each instalment that repays principal, plus any change in the flat's value over time. That second part — price growth — is the most uncertain input in the whole calculation, and it should be treated with the most caution. A comparison that only works if prices rise fast every year is not a comparison. It is a bet.
A worked illustration
Consider a purely illustrative household. Suppose it rents a flat for Tk 35,000 a month, with rent rising by 5 per cent a year. Suppose the equivalent flat to buy costs Tk 1 crore, bought with a Tk 20 lakh down payment plus purchase costs, and a loan of Tk 80 lakh. Using the Estate News calculator example — Tk 80 lakh at 11 per cent over 20 years — the monthly instalment is about Tk 82,575.
In year one, renting costs Tk 4.2 lakh in rent. Owning costs about Tk 9.9 lakh in instalments, plus maintenance and charges, against which only a small part of each instalment repays principal in the early years, when interest takes the largest share. On a simple cash-outflow view, renting is far cheaper in year one. That is normal, and it is why short stays almost always favour renting.
But the two lines move in opposite directions. Rent rises each year — at 5 per cent a year, Tk 35,000 becomes about Tk 44,600 after five years and about Tk 57,000 after ten, on a compound basis. The instalment, if the rate is unchanged, stays at Tk 82,575. Meanwhile, the share of each instalment that repays principal grows steadily, so more of the owner's monthly payment builds equity rather than paying interest. Add maintenance at, for illustration, Tk 5,000 a month rising over time, and count the return forgone on the down payment, and the crossing point in this illustration falls roughly in the early-to-middle years of the second decade — later if rent grows slowly or rates rise, earlier if rent grows fast or the buyer stays put for a very long time. The exact year matters less than the shape: the longer the household stays, the stronger buying looks; the shorter the stay, the stronger renting looks.
The break-even point is not a date on a calendar. It is a test of how long you will actually stay.
What changes the answer most
Four inputs move the break-even year more than any others. First, rent growth. If rents rise fast, the renter's costs compound quickly and buying breaks even sooner. If rents are flat for years, renting stays cheap for longer. Rent growth differs sharply by area in Dhaka, so a city-wide average can mislead for a particular neighbourhood.
Second, interest rates. A higher rate raises the instalment and increases the interest share of early payments, pushing break-even later. A lower rate does the reverse. Because floating rates can move during the loan, a comparison done at today's rate should also be tested at a rate one or two points higher.
Third, maintenance and ownership costs. Older buildings, buildings with lifts, generators and large common areas, and flats needing early renovation all carry higher running costs. Underestimating these flatters buying. A realistic annual allowance, not zero, belongs in every comparison.
This article is for information only and is not financial advice. Loan terms, rents and costs vary by property and lender; readers should base decisions on written quotations for their own case.
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