Compare buying a Rs 30,000,000 home with a Rs 9,000,000 down payment, financed over 20 years at a 20%
markup, against renting at Rs 120,000 a month with 8% annual rent inflation, both held for 7 years.
On the buy side, one-off transfer taxes come to about Rs 1,050,000, the 236K advance tax of
Rs 450,000 plus stamp duty of Rs 300,000 and registration of Rs 300,000. The markup paid on the loan
over the first 7 years is about Rs 28,748,180, and recurring property tax adds roughly Rs 504,000, so
the total cash cost of buying is about Rs 30,302,180, ignoring any rise in the home's value. Renting
for 7 years with rent inflating 8% a year totals about Rs 12,848,837. On these inputs renting costs
less in pure cash terms, largely because a 20% markup front-loads enormous interest in the early
years of a long mortgage.
Item
Amount (PKR)
Transfer taxes (236K, stamp, registration)
Rs 1,050,000
Markup paid over 7 years
Rs 28,748,180
Property tax over 7 years
Rs 504,000
Total cost of buying
Rs 30,302,180
Total cost of renting
Rs 12,848,837
How it is calculated
The tool sums the cash cost of each path over your holding period. For buying, it adds three things,
the one-off transfer taxes on the price, namely the 236K advance tax for a filer plus stamp duty and
registration, the markup portion of the mortgage actually paid during the holding period, and the
recurring property tax based on an annual rental value proxied from the rent. It amortizes the loan
month by month to capture only the interest paid, not the principal you still owe as equity. For
renting, it adds up each year's rent, inflating it once a year at the rate you set. It then names the
cheaper path. Crucially the comparison is cash only, it excludes any capital appreciation on the home
and the equity you build by repaying principal, so a buy result that looks expensive here can still
win once rising property values are counted.
Frequently asked questions
Is it better to rent or buy a home in Pakistan?
It depends on how long you stay and the gap between rent and financing cost. Buying carries large one-off transfer taxes, stamp duty and the section 236K advance tax, plus mortgage markup and recurring property tax. Renting avoids those but rent inflates each year. This calculator sums both paths over your holding period so you can see which costs less in cash terms, ignoring any capital appreciation on the property.
What transfer taxes does a buyer pay when purchasing property in Pakistan?
A buyer typically pays the section 236K advance tax, stamp duty, and a registration fee. For a filer the 236K rate is 3% of the property value, rising to 6% for a non-filer. Stamp duty is set at the provincial level and commonly runs at 1% to 3% of the declared value, and registration adds a further 1%. All three are one-off costs at the time of purchase and this calculator includes them in the buy-side total.
Why does the calculator compare cash cost rather than total wealth?
Cash cost shows what actually leaves your pocket over the holding period, which is the fairest comparison when you are deciding whether you can afford to buy today. Buying also builds equity as you repay principal and may benefit from property price appreciation, but those gains are uncertain and illiquid until you sell. This tool isolates the cash outflow so you can see the floor cost of each path, then layer in your own estimate of capital gain separately.
At what holding period does buying typically become cheaper than renting in Pakistan?
It varies with the markup rate and rent inflation, but in general the large upfront transfer taxes and the interest-heavy early years of a long mortgage mean renting is cheaper in cash terms for the first several years. As rent inflates and the outstanding principal falls, the balance shifts. At a 20% markup rate the crossover often takes more than a decade, while a lower markup and fast-rising rent can bring it forward to five to seven years. Use the holding-period slider to find the crossover for your specific inputs.