EMI Vs SIP: What Works Better For Buying A Rs 50-Lakh House?

Buying a house is a dream for many, but financing it is no cakewalk. Amid rising property prices, buying a house requires substantial investment and long-term financial commitment.

Many turn to home loans to realise their dream of owning a house. While a home loan could be a viable option for immediate ownership, it may lead to a significant financial burden for many years. The rising cost of living and sustained financial pressure can prove to be formidable challenges.

While Equated Monthly Instalment (EMI) for home loans is a traditionally accepted route, many people have also started exploring new-age alternatives. These include options such as a systematic investment plan (SIPs) in mutual funds. Investors with a long-term horizon and higher risk appetite are willing to bet on SIPs to create their housing corpus, while also earning attractive returns.

It could be confusing for many to decide between a home loan and an SIP to buy a house. Opting for a home loan may allow you to buy the house immediately, but the EMI burden may lead to financial difficulties in the long run. On the other hand, you can invest the same EMI amount through an SIP and build the required corpus to buy the house later.

Let’s take a look at both home loan and SIP options using an example of a house worth Rs 50 lakh. It could be helpful in understanding which of the two is a smarter financial decision based on returns and long-term tenure.

Home Loan Of Rs 50 Lakh

Loan Amount: Rs 50 lakh

Tenure: 20 years

Interest: 7.9%

Monthly EMI: 41,511

Principal Amount: Rs 50 lakh

Interest Amount: Rs 49,62,727

Total Amount Payable: Rs 99,62,727

As per the above calculation, the EMI for a home loan of Rs 50 lakh will be around Rs 41,500 at the interest rate of 7.9% per annum over a tenure of 20 years. Here, the total interest payable stands almost equal to the principal amount over the 20-year repayment period.

Opting for a home loan provides immediate relief from rent. It also offers the benefits of house ownership and potential tax advantages. However, the downside includes a high interest component, which can affect long-term savings and other financial goals.

In contrast, an SIP of Rs 41,500 for 20 years can turn into a significant amount, assuming the mutual fund gives an average return of 12% per annum.

Monthly amount: Rs 41,500

Investment duration: 20 years

Expected rate of return: 12%

Invested amount: Rs 99,60,000

Estimated returns: Rs 3,15,04,638

Total corpus value: Rs 4,14,64,638

An SIP of Rs 41,500 over 20 years may help you in building a corpus of over Rs 4.14 crore, including a total return of Rs 3.15 crore. With the same EMI and assumed interest rate, you can easily reach the target of Rs 50 lakh for buying a house in just seven years, as the investments would grow into Rs 54.77 lakh, with returns of Rs 19.91 lakh.

Investing the amount that would have gone into EMIs can potentially create a corpus worth more than four times the invested sum through SIPs, as per the above calculation. This approach allows investors to build a substantial corpus while also using the additional returns to manage other expenses. However, investors should remember that the value of a house bought for Rs 50 lakh in 2025 is likely to rise significantly in 20 years. Inflation, property appreciation, cost of living and taxes can significantly impact actual SIP returns.

Moreover, stock market returns are never guaranteed and this option should be exercised by investors with a significant risk appetite. Hence, it is always advisable to consult a financial expert before making long-term investment decisions. There is no fixed formula to choose between a home loan and SIP for buying a house. It should be based on your financial situation and after doing a risk assessment.