Traditionally real estate in the form of the house that we live in has been the single largest investment for most of us. This is seen not only in India [ Images ] but across the world. Let us now apply the metrics that we attribute to investments in general to real estate and see the answers that come up.
Current income
If the investment is on the house that we live in ourselves, there is no current income. This is one of the main negatives about the house that we live in. In a financial cash flow perspective given by Robert Kiyosaki, it is not an asset. Because the house is cash flow negative owing to the maintenance activities and tax that we have to pay for it.
Rent from a house or commercial property is a good source of current income. Although at current bank rates the rent from a house is generally only about ½ of the loan EMI, the catching up happens only after the loan is closed. A 1000 square feet house will cost conservatively about Rs 2500/- per square feet (in B class cities like Coimbatore, Kolhapur, Guntur, etc) leading to the house value of Rs 25 lakhs. A loan for 80 per cent of the value (Rs 20lakhs) at current interest rates (9 per cent) and 15 years term will require an EMI of about Rs 20,300. The rent for the same house in the mentioned cities may not top even Rs 10,000.
More : business.rediff.com
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