Property investing not as lucrative as it was

Photo: Mint

The Reserve Bank of India’s House Price Index, which monitors house pricing in ten Indian cities, displays that returns from home ownership of have plummeted drastically. The median return on property ownership in the previous 10 years was 11.6 percent annually.

What is the decadal return in the property sector?

In a pioneering move, we have info spanning a full decade for the House Price Index from June 2010 to June 2020. The median annual return over this time is 11.6 percent annually. It is significant to keep in mind that this is the median return of total of India, and the return changes across cities.

Lucknow, with a return of 16.1 percent per annum, is the best performing city when pitted against 9 other cities analyzed by the info. Kolkata is second at 13.3 percent annually. Houses in Mumbai and Delhi posted revenues of 11.2 percent and 12.2 percent respectively. Jaipur remained at the bottom with a return of 6.1 percent each year.

How have returns been since 2015?

Much of the returns from homeowners during the past 10 years have been made between June 2010 and June 2015. And the returns between June 2015 and June 2020 were decreased to 5.5 percent each year. Delhi was the worst ranked city in this time, with a return of 1.5 percent annually. Kolkata was the follow-up for the worst city with a return of 3.2 percent annually. This is a strong sign that property investing returns in these cities have been frontloaded over the past 10 years. But, the index just shows the structured component of property returns.

What’s the general pattern over the past decade?

In June 2011, the annual returns amounted to 23.1 percent. They peaked at 26.3 percent in the last month of 2011 and have gradually declined since then. In June of this year, the annual profit was 2.8 percent, a record worst when looking at the index. Undoubtedly, the disruption of activity after the lockdown and downturn in the nation’s growth holds responsibility for such a picture.

What’s the price of property ownership?

Owning property still comes with a number of fees. This begins with the purchaser needing to pay a stamp duty to the the country while buying property. There is also a maintenance charge that has to be cashed out. Don’t forget the ongoing expense of running a household and the yearly asset tax. Naturally, houses can and are frequently rented out, but rental income is not high and is somewhere amid 1.5 and 2 percent. It needs to be taken into account that some tax relief is often given for loans taken for house purchases.

What are the actual returns of property ownership?

In addition to all the fees that must be cashed out by an individual investing in properties, there’s inflation. When you take into account the fee of owning property, even with a few advantages, the general return in most cases has not been significant in the past ten years. This is without taking into consideration that lots of builders either do not deliver houses on time or just disappear. Naturally, all this changes from person to person, from city to city, and from area to area.