First let me clarify there is nothing called a Rs. 1 crore house in Mumbai anymore. If you buy a Rs. 1.5 crore house, it actually works out as follows:
Technical cost of the house (today) is really immaterial…your cash flows are as follows:
Down payment Rs. 30 lakhs
Transaction costs Rs. 15 lakhs
EMI Rs. 288 lakhs
this means the total cost of the house is Rs. 433. Now assume that this house has appreciated to Rs. 5.8 crore after 20 years, what is the IRR on your cost? Hey gimme a break….now read what my friend Vivek Kaul has to say about a Mumbai house…
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