In early 2016, Naresh Jain, a tax consultant based out of Northwest Delhi, India, was hurriedly looking at rental properties on a popular real estate listing website. His rental agreement with his landlord had ended the day before, leaving him 30 days to prepare to vacate the apartment and look for a new one. Jain had lived in the spacious, two-bedroom apartment in Northwest Delhi for the past five years as it was within a reasonable commuting distance to his workplace. However, because of a sudden downturn in business conditions and an immediate need for money, his landlord wanted to sell the property and therefore had asked Jain to vacate the premises.

After a busy day looking online at various rental properties, Jain had come across a furnished apartment next door that was identical to his. Like his apartment, it had two bedrooms, two bathrooms, a spacious hall, and a state-of-the-art kitchen. Jain’s initial enquiries to the property broker revealed that it would likely be rented at around ₹30,000¹ per month, including parking facilities. This was well in line with the rent he was currently paying, and Jain decided to go ahead and meet the broker. During his meeting with the broker, Jain learned that an identical apartment in an adjoining locality was for sale for ₹12.5 million. The flat was very well furnished and had all the amenities that Jain was looking for. Jain had a lot of quantitative thinking to do as he considered the alternatives of renting versus buying an apartment. How would he finance the home in the case that he decided to buy? What would the monthly mortgage payments be (in the case that he took out a loan to buy the home) to buy the apartment, compared to renting it? How would he incorporate the opportunity cost and taxation aspect in his calculations? Most importantly, given the state of the real estate market in India, what kind of capital gains or losses could he expect over time in the case that he chose to buy the apartment?