Therefore, if you are planning to venture into the real estate investment
industry in 2024, he or she must have realized the following factors: Bravo!
You are all ready to be the next Ambani in your circle, showing those
property papers as if they are the golden ticket to Willy Wonka’s factory.
But, hold up—before you start imagining swimming in money like Uncle
Scrooge, there’s one tiny (okay, huge) thing you need to figure out: ROI tells
you the amount of return coming from the investment made in a certain
product. No need to worry; I’ll explain it to you in layman terms and will
add some sarcasm and Indian jokes you can expect. For let’s not forget that
we are dealing with real estate after all, and what’s real estate without its
very own dash of masala?
Step 1: ROI—The Bread Pakora of Investments
ROI is basically the bread pakora of real estate. Simple on the outside, but if
you don’t get the filling right, it’s just soggy bread. And no one likes soggy
bread. So, let’s figure out what you’re biting into:
ROI is the measure of how much profit you’re making compared to what
you’ve invested. It’s like your aunty at a wedding asking, “Kitna kama liya
property se?” And trust me, you want to answer that question with
confidence.
The formula? Super simple:
������ = (Gain from Investment – Cost of Investment)
—————————————————– × 100
Cost of Investment
Now, don’t go as though you have an appointment somewhere like the
Amazon deal! So I am here to translate this into something altogether more
familiar.
Step 2: They come from every corner of India: intelligent
rickshaw drivers, phenomenal investors like Mr. Sharma.
Now, let’s meet the prototype every Indian man who is finally learning the
joys of parenting—the ” Mr. Sharma.” Once upon a time, Mr. Sharma loved
to give investment advice, like investing in the property, but they are not
making more of it! Sharmaji bought a flat in Pune for ₹50 lakhs in
2020—what a classic Sharma move. Now it is 2024 and his investment has
risen up to ₹70 lakhs. The guy is already planning for the next Hyundai
Creta; let me quickly do the calculations before he starts jumping around.
Therefore, Sharmaji’s gain from investment = 70,00,000 – 50,00,000 = ₹
20 lakhs. Cost of investment incurred by him = ₹50 lakhs (as mentioned
obviously).
Plugging this into the formula:
������ = 20 lakhs
——————— × 100 = 40%
50 lakhs
40%! Oh Sharmaji is dancing like it is Ganesh Chaturthi for god sake. But
that is not the end of this story; there is more to tell here.
Step 3: Both of these types of costs are indeed hidden: the sari
sale of real estate.
Real estate is sneaky. Right when you’re convinced you’ve landed what
appears to be the perfect bargain in the marketplace, other charges
manifest in a never-ending saga, much like your mother insisting you pick
the perfect saree off a sale. These costs reduce your ROI at a much faster
pace than any relative you know devouring samosas at any family event.
Here’s what to look out for:
Stamp Duty and Registration: You can’t omit this unless you are in a
Bollywood movie where there are no rules about worrying. In some cases,
this could be as little as 5 percent; in others, it could be as much as 7
percent of the value of the property. Hence, Sharmaji was able to put up
₹3.5 lakhs for ₹50 lakh flat just to file some papers.
Brokerage: Because no house in India is purchased without that cousin,
who is a friend of a friend. In simple terms, brokerage can amount up to 1-2
percent of the price of the property.
Maintenance: If you’re buying in a complex, you’ll have to pay for
maintenance. And no, you can’t escape this by pretending not to see the
society WhatsApp group messages. Sharmaji has been paying ₹5,000 per
month for four years (₹2.4 lakhs in total).
So, let’s update Sharmaji’s Cost of Investment: ₹50 lakhs + ₹3.5 lakhs
(stamp duty) + ₹1 lakh (brokerage) + ₹2.4 lakhs (maintenance) = ₹56.9
lakhs.
Now, let’s update the ROI:
ROI= ₹70 lakhs−₹56.9 lakhs
—————————– ×100=23.1%
₹56.9 lakhs
Oof! That ROI just took a nose dive from 40% to 23.1%. Sharmaji’s Creta
dreams are now downgraded to a second-hand i10.
Step 4: Rental Income—The Lifebuoy
But hold on, Sharmaji didn’t just buy the flat to stare at the walls. He rented
it out, making a solid ₹25,000 per month. Over four years, that’s ₹12 lakh.
Time to add that to his total gain!
New gain = ₹70 lakhs + ₹12 lakhs (rental income) = ₹82 lakhs.
Let’s recalculate the ROI, adding rental income to the gain:
ROI=₹82 lakhs−₹56.9
———————- ×100=44%
₹56.9 lakhs
Bam! Sharmaji’s ROI just got a much-needed boost, and now he’s eyeing a
Swift instead of an i10.
Step 5: Inflation—The Chai Pe Charcha You Can’t Ignore
But wait, before Sharmaji goes car shopping, let’s talk about inflation.
Inflation is like that relative who constantly reminds you, “Arre, prices are
always going up, beta!” If the inflation rate has been 5% per year,
Sharmaji’s ₹50 lakhs from 2020 doesn’t have the same dum in 2024.
So, you have to factor in how much your money’s value has eroded thanks
to inflation. Sharmaji’s ₹50 lakhs in 2020 is equivalent to about ₹60.7 lakhs
in 2024. With this in mind, let’s review that ROI again. (Sorry, Sharmaji).
Adjusted Cost of Investment (for inflation) = ₹60.7 lakhs.
Final ROI:
ROI=₹82 lakhs−₹60.7 lakhs
—————————– ×100=35.1%
₹60.7 lakhs
Still not bad! Sharmaji can breathe easy, and maybe, just maybe, he can still
get that Creta.
Step 6: The 2024 Special: In November, we feature some of the
more interesting people and trends in the Asian media scene.
Now, investing in 2024 has its peculiarities. The real estate market is
evolving as quickly as your chachi does with his new girlfriend’s WhatsApp
DP. Here’s what you should keep an eye on:
Interest Rates: That is why the Reserve Bank of India (RBI) is singing a
tune different from what it sang before on interest rates, and home loan
rates may be no exception. It is crystal clear that when carrying out these
assessments at low rates, more buyers will be achieved; though, when the
rates are hiked, demand might be affected.
Urban Expansion: Modern cities are growing as if they are inflated after
excess consumption of golgappas. Target uprising zones before its
development is commenced—metrorails, IT corridors, malls all add a plus
point to property valuation.
Remote Work Boom: As the current pandemic permanently shifts a portion
or even the whole working arrangement to home offices, the requirement of
having a home office, larger balconies (we all need fresh air now!), and tier
2 city properties has increased.
Conclusion: The Final Chai
ROI is not a deft strategy but yes, it is not as simple as buying some land
and eventually finding oil over there. Thus you add the hidden costs, rental
income, and inflation to understand whether your investment is profitable
for you or whether you are dreaming to own a luxurious SUV.
So, be your Sharmaji, don’t lose your sleep, and when one day someone will
ask you, “Kitna kamata hai property se?” You know that you will have a
good answer. Oh, and maybe don’t spend your days dreaming about cars
until you can factor your dreams into the equation.