What is the Real Estate ROI?
Property return has two engines: rental income (usually 2–4% a year in Indian residential) and capital appreciation (historically 5–8%, though highly location-dependent). Neither alone tells the story.
The mistake most buyers make is ignoring acquisition costs — stamp duty, registration, brokerage and legal fees typically add 7–9% to the purchase price and must be part of the invested base.
Formula & worked example
Combine both sources against total money in:
Exit value = Price × (1 + a)n + total rent
ROI = ((Exit value / Invested)1/n − 1) × 100
Worked example: ₹70,00,000 property plus ₹5,00,000 costs = ₹75 lakh in. Over 10 years at 6% appreciation it reaches ₹1.25 crore, plus ₹24 lakh of rent = ₹1.49 crore. That is an annualised return of about 7.1% — respectable, but below what the 6% appreciation figure alone suggested, because the ₹5 lakh of costs never earn anything.
How to use this real estate roi calculator
- Enter the purchase price and all acquisition costs separately.
- Use net rent after maintenance and vacancy, not gross.
- Be conservative on appreciation — 5–7% is realistic; double-digit assumptions rarely hold across a decade.
- Compare the annualised figure against equity or debt returns for the same period.
Smart tips
- Stamp duty and registration alone run 5–8% depending on the state — that is a year of appreciation gone on day one.
- This ignores loan interest. If you financed the purchase, subtract interest paid to see the real return on your own money.
- Illiquidity is a real cost. Property can take 6–18 months to sell, and distress sales fetch well below market.
- Compare against a REIT before buying a second property — similar exposure, far better liquidity and no maintenance.
Frequently asked questions
What is a good ROI on property in India?
A combined 8–10% annualised (rent plus appreciation) is solid. Many properties deliver 6–8%, roughly matching debt funds with far less liquidity.
Should I include my home loan in this?
This calculates the property's return. If financed, leverage amplifies both gains and losses — subtract total interest paid to see the return on your own capital.
Does this include tax?
No. Rental income is taxed at your slab, and capital gains at 12.5% LTCG after 24 months. Both reduce the net figure.
Is real estate better than mutual funds?
Historically Indian equity has outperformed residential property over long periods, with far better liquidity. Property offers leverage and usable value, which funds do not.
Want the theory behind the numbers? Read our property investment guides on the Money Blog.