BloombergQuint's Big Decisions podcast gets you the insights you need to make big money decisions with confidence.
Most people have been part of a conversation on real estate. It is, after all, the asset that Indians love almost as much as gold.
Invariably, the person telling the story describes how they acquired a property at say Rs 50 lakh, and that 20 years later is worth Rs 1.2 crore! While some gasp with wonder at the magnificent increase in value, a canny investor won't be taken in so easily.
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The thing is, the story-teller didn't mention that they took a loan to buy the house. Say, a Rs 40-lakh loan with an interest rate of 9.5% repaid over 20 years amounts to a total repayment of Rs 89.5 lakh. What's more, the person paid stamp duty and brokerage on the house. And over the last 20 years, maintenance and renovation have cost as much as Rs 15 lakh. The return on investment after costs, therefore, is much less magnificent.
On this Big Decisions podcast, BloombergQuint spoke with Arvind Rao, chartered accountant and certified financial planner, about why it is so important to plan investments based on post-cost returns.
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