The true potential of the microalgae-based wastewater treatment (MWT) process is determined based on whether the process will provide a positive energy output and whether it is economically viable. The objectives of this study are dynamic modelling of microalgae growth based on initial wastewater concentration, temperature, solar radiation and a techno-economic assessment for an MWT scheme for application in a hot, dry climate. Through reference to relevant literature data on MWT in the Indian subcontinent, a selection of appropriate microalgal species Chlorella and Scenedesmus was made. The dynamic model developed was successfully calibrated and validated using independent experimental data collected from the published literature. Cost of production of bio-crude from microalgae grown in a hybrid photobioreactor and pond system in kitchen wastewater of Indian Institute of Technology, Hyderabad was calculated. A break-even selling price (BESP) of US$0.549/kg was obtained for the microalgae biomass. The cost of production of 1 L bio-crude was US$0.96 (Rs 69–74), which is comparable with crude oil cost. The model developed can be used by practising engineers to predict biomass growth and nutrient removal, thereby achieving a break-even point for cost efficiency. © 2022 The Authors.