I am sure you rubbed your eyes when you saw this heading….that too on Subramoney.com (the world believes that I am a RE hater, so be it).

Let me tell you WHO should buy RE, how much, and with how much leverage:


You are a 48 year old male with a CTC of Rs. 70L, your wife works too and has an income of Rs. 40 Lakhs a year. Your primary residence has been paid off in full and you are likely to inherit a nice big house in a metro from your parents. Your wife too is a only daughter and is likely to inherit one house and that too is in a prime location in a different metro. You have no clue as to when the inheritance will happen.

Your income from other sources is about Rs. 1.75L per month, AND you keep paying 30% tax on that. It sucks. You keep saying this to yourself.

Now you have an opportunity to buy a COMMERCIAL space (office) for Rs. 4 crores, and you are wondering whether to buy. You have about Rs. 1.5cr available and you can rustle up another Rs. 50 L from your wife’s investments. The question is ‘should you buy or should you not’.

THE ANSWER IS:  OF COURSE YOU SHOULD BUY….let us see and say you should…and why:

1. He has a lot of cash sloshing around, and is not invested very wisely: If he has Rs. 2 crores available it means it is lying in some not very efficient funds, it should be used.

2. Assuming he invests Rs. 2 crore of his own money and Rs. 2 crores of borrowed money (possible to borrow for commercial RE also) he will an asset which could start giving him a rent of about Rs. 1.25L a month.

3. It will be a case of negative gearing – and the LOSS that he has on house property will be set off against the salary income – this will reduce his income VERY SMARTLY.

4. He can give it on a big deposit and a very low rent, thus reducing the amount borrowed, as well as the current income.

5. It is easier to let out a commercial property – and he could enter into a longer agreement – with an annual increasing clause.




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  1. It seems like the idea outlined in the post will help reduce tax on salary & build an asset but I wonder if investing ones surplus in Real Estate makes for a case. Given the weak market conditions coupled with high acquisition cost, high disposition cost, surplus availability, lower appreciation & taxes – getting decent returns on real estate investments seems challenging.

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