Expectations from Union Budget 2018-19

With the demonetisation effect the tax collected this year has been increased drastically. This leaves many in good terms of expectations from Union Budget 2018-19.

Demonetisation, RERA and GST were really major changes for Indian economical growth in the year 2017. Also, being this an election year, the expectations from Union Budget 2018-19 are no less.

The major expectation is it should be a common man as well as business class friendly one. India has jumped 30 places and 53 places in Ease of Doing Business rankings and Ease of Paying Taxes category respectively as per the rankings released by World Bank. Government would like to improve these rankings in the years to come and further policies and measures are expected to be formulated in this direction.

Major expectations from Union Budget 2018-19,  are  change of slab rate by increasing the exemption limits for the employed and senior citizens. This expectation is based on the previous year changes in the tax slabs. To please the masses and to reduce the gap amongst the poor and rich, limit for deduction under Section 80C and Section 80D might be increased say from 2.5 lakh to 3 lakh rupees per annum as the minimum taxable income.

Tax on Investments have a higher expectation from Union Budget 2018-19.

The repayment of the principal of a loan taken to buy or construct a residential property is eligible for tax deductions under Section 80C. This deduction is also applicable on stamp duty, registration fees and transfer expenses. Tax payers can expect the exemption limit under Section 80C to be hiked by Rs. 1,00,000 to Rs. 2.5 lakh. Right now exemption under Section 80C of the Income Tax Act is Rs. 1.5 lakh.

Expectations are very high as this will be the First Budget after the implementation of Goods and Services Tax (GST). Amendment is also expected in the GST laws to allow input tax credit to the customer provided he has made the payment of invoice along with tax to the supplier. At present, input tax credit is available only if the tax charged in respect of the supply has been actually paid to the Government by the supplier of goods and services.

Expectations are also high from the Finance Minister to change the periodicity of filling of GST returns from monthly to quarterly for all the taxpayers though the payment of tax can be made monthly for taxpayers having a specified aggregate annual turnover. This will lead to simplified compliance mechanism and will boost the confidence of tax payers by reducing the much added compliance burden on the taxpayers.

epectations from the Union Budget 2018-19
Expectations from the Union Budget 2018-19
Expectations from Union Budget 2018-19 w.r.t Affordable Housing :

‘Housing for all by 2022’ is one of the pet projects for the government and it wants to deliver 10 million houses under this program. Out of 10 million, 95% of the houses are to be constructed for Economically Weaker Sections (EWS) and Low Income Groups (LIG). As the affordability of this segment and the house value is low, the impact of slightest upward cost pressure is magnified and becomes a deal breaker. The current GST rate of 18% coupled with 1/3rd abatement for land is adding huge upwards pressure on the overall cost of house. There are expectations for lowering of the GST rates only for affordable housing projects to 12% with 50% abatement for land taking the effective GST rate to 6%. This shall provide a boost to the cause of housing for all by 2022.

Expectations from Union Budget 2018-19 – Tax Saving w.r.t Home Loans
Current Amount Expectation from Union Budget 2018-19
Deduction under 80c 1,50,000 /- 2,50,000/-
Deduction under 80c(Principal Amount) 1,50,000/- 2,50,000/-
Deduction under 24B (Interest Amount) 2,00,000/- 3,00,000/-
Stamp Duty Varies from 3-6% Constant 3% across all the states.
GST rate 12% 6%
Total interest rate (GST + Stamp Duty) 18% 8%

Also reduction of stamp duty which presently ranges from 3 to 6 per cent, varying across different states, as a result of which the consumer pays an additional amount of approximately 18 per cent only in taxes to the government (including GST and stamp duty). The government should look at reducing this cost, rationalising and unifying stamp duty rates across the country.

What are the tax benefits of your home loan?

Under Section 24, you are empowered to claim up to Rs 200000 or the actual amount of repaid interest. However, you can only make the claim when you are in possession of the house.
Under Section 80C, you can claim the principal up to the maximum limit of Rs 150000 across all the investments made under the section 80C. However, you might be needed to show the lender’s statement showing the not only the interest and principal components but also the repayment for the year.

Expectations from Union Budget 2018-19 w.r.t. Direct Taxes
Income Slab Tax Rate
Income up to Rs 5,00,000 No tax
Income from Rs 5,00,000 – Rs 10,00,000 5%
Income from Rs 10,00,000 – 20,00,000 20%
Income more than Rs 20,00,000 30%
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

Cess: 3% on total of income tax + surcharge.
*Income tax exemption limit for FY 2018-2019 is up to Rs.5,00,000 for individual & HUF other than those covered in Part(II) or (III)
Expectations from Union Budget 2018-19 w.r.t  Direct Taxes.
PART II: Income Tax Slab for Senior Citizens (60 Years Old Or More but Less than 80 Years Old)(Both Men & Women)
Income Slab Tax Rate
Income up to Rs 8,00,000 No tax
Income from Rs 8,00,000 – Rs 10,00,000 5%
Income from Rs 10,00,000 – 20,00,000 20%
Income more than Rs 20,00,000 30%
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

Cess: 3% on total of income tax + surcharge.
*Income tax exemption limit for FY 2018-2019 is up to Rs.5,00,000 for individual & HUF other than those covered in Part(II) or (III)
Expectations from the Union Budget 2018-19 w.r.t Rural Economy / Farm Loans:

In Finance Minister, Arun Jaitley’s budget speech on 1st February 2017 the finance minister stated that he proposes to present the budget under ten distinct themes and rural population was one of the said themes. Experts believe that budget 2018 will be no different in fact the FM is expected to focus more on rural India and its economy with renewed vigor. Consecutive years of drought and then demonetization have had its impact on the rural economy too, but recent surge in tractor sales may indicate that the worse may be behind us. Tractor manufacturers sold a whopping 363,071 unit in the April – September 2017 period, a 21% increase compared to the same period last year. Over the last couple of years policies such as farm loan waiver and subsidies have become a norm but these sops do not reach the small farmers, may be fiscally unviable and even counterproductive. Experts believe that the FM in his budget 2018 should focus on providing relief to small farmers with very small or negligible land holdings. This can be done by taking steps to ensure agri-GDP growth and rural wage growth.

The budget is a great opportunity to create a level playing field amongst individuals.

The top agenda of the government would be to create a positive feeling for the future among the masses considering this year’s Lok Sabha elections as well as to boost the investor confidence.

Lets hope for an investor friendly budget 2018-19.

What you don’t know about BITCOINS

Is Bitcoins legal in India?

At present, there are no regulations governing virtual currencies like bitcoins in India. RBI, on December 24, 2013, issued a press release on virtual currencies like bitcoins, litecoins, bbqcoins, dogecoins stating that creation, trade and usage of virtual currencies as a medium for payment is not authorized by any central bank or monetary authority. Further, RBI has cautioned virtual currency traders and users to various security related risks such as hacking, malware attack etc.

While RBI has not legalized bitcoins, it has declared them unauthorized as of now. RBI is currently examining the risks associated with the usage, holding and trading of virtual currencies under the extant legal and regulatory framework of India, including foreign exchange and payment systems laws and regulations.

There is enough scope for legalizing bitcoins. One has to wait and watch as to which approach the Indian government takes. Keeping pace with the changing times, Indian government will have to come out with appropriate amendments in the foreign exchange and information technology laws to specifically include bitcons.

What are the popular bitcoin websites that do transactions?

HighKart.com became the first e-commerce site in India to exclusively accept bitcoins as a payment method. WERWIRED, a Bangalore-based geospatial, security and entertainment consulting company offered bitcoins as a mode of payment for its customers. Castle Bloom, a salon in Chandigarh, became the first physical outlet to start accepting the digital currency. Buysellbitco.in, an online portal dealt in buying and selling of bitcoins in India. But it was raided by the Enforcement Directorate.

Some of the Indian Exchanges to Buy Bitcoins are PocketBits, Unocoin, Zebpay, Coinsecure.

PocketBits is one of the Best Cryptocurrency Exchange to Buy & Sell Bitcoins or Altcoins in India.

Unocoin is one of the India’s Trusted Bitcoin Company having more than 150,000 users. Buy and Sell Bitcoins in India from Unocoin. Apart from Buying and Selling Bitcoins, you can Send & Receive Bitcoins. It can also be used to do Prepaid/Postpaid Recharges. Unocoin can be accessed from the Website and Unocoin also has an Android & iOS App

What is the value of the bitcoin?

The value of the bitcoin varies in each website. Please do check with different traders and in different websites before buying it.

Who are those trading in bitcoins in India?

Tech-savvy young investors, real estate players and jewellers are among those invested in bitcoin and other virtual currencies.

How do I invest in Bitcoins?

You can get bitcoin by:
– Mining them (the process by which new Bitcoins are generated by solving the math problems quoted in the website).
– Purchasing them from bitcoin exchange for real money
– Receiving them in return for sale of goods or services

persoanl loans for bitcoins
Personal loans for bitcoins

Is it worth investing in bitcoins?

Today’s world is running towards digitalisation. So, it is not quite far for India to reach the so called Digital currency stage. Just that the Government has to make it regularised.

Ofcourse, it is worth investing once the government regularises it.

Is it safe investing in Bitcoins?

The network is peer-to-peer and transactions take place between users directly through the use of cryptography, without an intermediary. These transactions are verified by network nodes and recorded in an immutable public distributed ledger called a blockchain.

The Sharp rise in bitcoin exchange rate in recent years (from $1000 to $1300 for January-April 2017 and from $1300 to $1700 in the last two weeks) raises concerns that the rate may “collapse” and even to return to their former positions; however, bitcoin had and still have serious preconditions for growth, so it is not necessary to consider this growth as a “bubble”.

What is the minimum amount needed to buy Bitcoins in India?

You need not buy one Bitcoin to begin investing with. You can start with buying a part of the Bitcoin. The minimum amount needed to begin investing in Bitcoins is around Rs.500.

How is investing in Bitcoins advantageous for me?

Bitcoin shows stable annual scale, growth rates, and there is reason to believe that this trend will continue. The graph below shows that the exchange rate of bitcoin over the last 12 months has increased about 4 times from 450 to $ 1,700.

Bitcoins have a number of benefits. It significantly reduces transaction costs, enables the growth, ease and security of e-commerce and physical transactions, etc.

What are the disadvantages of bitcoins?

– When goods are bought using Bitcoins, and the seller doesn’t send the promised goods, nothing can be done to reverse the transaction. This problem can be solved using a third party escrow service like ClearCoin, but then, escrow services would assume the role of banks, which would cause Bitcoins to be similar to a more traditional currency.
– Risk of Unknown Technical Flaws : The Bitcoin system could contain unexploited flaws. As this is a fairly new system, if Bitcoins were adopted widely, and a flaw was found, it could give tremendous wealth to the exploiter at the expense of destroying the Bitcoin economy.

Do be aware that most of them are out there to scam you. If you do decide to invest, make sure it’s going to a legit company that pays you back.

What are the legal procedures to buy Bitcoins in India?

Submit your PAN card and a valid address proof and a bank account. Make sure that the PAN and bank account belongs to the same person. The verification process takes about 2-3 working days. After this, you are good to go.

Do we get loans to invest in Bitcoins?

It depends on the risk potential. Say if you can afford some EMI for loans then you should go for it .

Investment is always Good.. And as you can see the bitcoins is going popular as compared to share market or any other investment plans in INDIA.
so, it is important for the money to be invested to increase your returns.

Find out some interest bearing funds when you invest in bitcoins. For example, BitBays is an exchange website which pays a small promotional interest rate on all balances held on their site.

So, calculate your interest to be paid on your loan and the interest gained in bitcoin investments and the final returns expected once you sell the bitcoins. Only if you are sure of gains, you can go for the loan.

What is the procedure to get loan for bitcoins?

The loan can be taken as personal loan as the reason for the personal loan need not be mentioned. The procedure can be followed just as you follow for the personal loan.

What  you should know before investing in bitcoins?

Since use of bitcoin involves high level of risks, unless ambiguity surrounding bitcoins is resolved its use cannot be foolproof.

Research before investing in Bitcoins. There are many websites and it is recommended to find the correct and trustworthy one.

How is the tax calculated when you trade in bitcoins?

The tax aspect of bitcoins is also a grey area, in order to comply with the income tax regulations, a person accepting bitcoins against services should pay income tax after converting bitcoins into rupees and the bitcoin sellers who earn profit can pay capital gains tax (if selling after a long duration). Such steps will legitimize the unregulated bitcoins transactions.

There are actually 3 ways in which you earn bitcoin & the taxation differs from one to another.

The income tax authorities may choose to tax the gains from bitcoins under the head “Income from other sources”. Further, if the income gets taxed under “Income from other sources”, the taxpayer would have to pay taxes at a rate as applicable to the tax slab he falls under. For eg, if his taxable income exceeds Rs 10 lakh, he would be liable to a tax @ 30% as against the flat rate of tax of 20% he would be liable to pay, if charged to tax under long-term capital gains. The benefit of indexation as would be available if taxed under capital gains , would also not be available if taxed under Income from other sources.

India has sent tax notices to tens of thousands of people dealing in cryptocurrency after a nationwide survey showed more than $3.5 billion worth of transactions have been conducted over a 17-month period.

So, it is also important to know the taxation rules and also to pay the tax when needed.

In summation, bitcoins are digital cash and decentralized, peer-to-peer payment system. Being volatile in nature, care has to be taken that a mechanism is devised to tackle risks associated with fraud and money laundering. Regulators will have to take steps to provide individuals and businesses with rules to integrate this new technology with the formal regulated financial systems.



Home Loan Prepayment

I am a 26-year-old man, working in an MNC in Chennai. Last year I decided to buy a home for myself. Buying a home was my biggest dream and thanks to the lofty home loan policies that banks and HFCs are offering these days. I managed to buy a 2 BHK. Well, I succeeded in managing to bag loan from one of the government banks and got it at a reasonable interest rate.

Now, I am a satisfied person and secured that few years down the line, I will own my house. But one thing that always boggled my mind was if I wish to prepay my loan then what is the nitty-gritty associated with it. Since I work in private sector, I don’t have much time to run around the bank to fulfill the formalities and the paperwork.

Then, one of my friends suggested to go through LoanYantra, an online loan management company. Well, my association with LoanYantra proved to be a successful one and they gave great tips which definitely cleared the air that surrounded the idea of home loan prepayment. For many to avoid the hassle of running behind the banks, here I am sharing my knowledge of Home Loan Prepayment.

What is Home Loan Prepayment?

Home Loan Prepayment is paying an additional amount to the outstanding principal of the loan amount while you are in the Home Loan tenure. This additional amount is over and above the regular EMIs. This helps in reducing the principal outstanding which in return helps in reducing your EMIs and/or your home loan tenure.

It might sound easy but there is a slight catch. Banks typically levy a prepayment charge of about 2 – 3% of the outstanding loan amount. This amount is charged if you are repaying above a certain amount or you are switching your bank. Although most of the banks don’t charge extra. Thus, it’s advisable that you enquire while you apply for your home loan about the prepayment charges as well.

What You Should Know About Home Loan Prepayment 

Home Loan Prepayment can be a bit tricky as some lenders include extra fees.  In case of home loan, banks borrow funds based on the commitment for long period, these funds have to be re-assigned through credit channels for which bank has to pay additional cost. Thus, banks discourage the process of prepayment by leving an extra charge on the outstanding loan amount.

To Prepay the Home Loan, it is advisable for the concerned person to attend. If not possible,the authorized person needs to carry a letter which says that the respective person is authorized by the lender to repay the loan.

Note : RBI and the NHB have abolished penalty on home loan prepayment (home loans with flexible interest rate). So banks usually do not levy extra fess. But conditions apply.

Home Loan Prepayment Vs Tenure and EMI.

Home Loan Prepayment reduces the outstanding principal amount. So, this inturn reduces your EMI or tenure. It is always wise to calculate and choose.

Loanyantra’s Tip : It is better to reduce the tenure and keep the EMI constant. When you have an increment in the salary, you can increase the EMI which will reduce the tenure even further.

Do’s ad Don’t’s of Home Loan Prepayment:

  • Carry your ID proof (Aadhar is the most preferred one).
  • Carry your chequebook in case you need extra.
  • Also remember to mention your name, account number, home loan account number behind the cheque when you issue.
  • Collect all your previous cheques if you wish to change your EMI.
  • A proof of source of funds for your Home Loan Prepayment.
  • Make sure that you update your CIBIL database after home loan prepayment as it helps in reducing the outstanding balance and also helps in improving your credit score.
Home Loan Prepayment charges of some of the popular banks and HFCs
Banks and HFCs associated with Loan Yantra Home Loan Prepayment Charges
IDBI Not more than one prepayment in a month
DHFL 3% + Service Tax
Indiabulls ZERO
Axis Floating Rate Loan: Nil

Fixed Rate Loan: 2% of outstanding principal/amount prepaid


Words of Wisdom –

LoanYantra is committed to making a difference in the approach towards availing home loan and paying it back. We are known fro absolute customer satisfaction and we work on it continuously. Stay connected with us on www.loanyantra.com and get a planned calender, timely alerts and valuable suggestions on Prepayment of your Home Loan.

Understand hybrid home loans in detail!

Hybrid loan, according to RBI, is a two step mortgage. It is an ARM (Adjustable Rate Mortgage) that has one rate for part of the mortgage and a different rate for the remaining part of the mortgage. The interest rate changes in accordance with the market rates. The borrower, on the other hand, may have the option of making a choice between a variable rate or a fixed rate on the adjustment or agreement date. 

Hybrid loan products are popular options that package the advantages of both floating and fixed rate products.

Hybrid loans are popularly referred to as ‘partly fixed partly floating lHybrid home loansoans’ . This mixed option lends flexibility and greater choice to the home buyer. A part of the home loan is anchored under fixed rate and the rest is exposed to the prevailing floating rate of interest. This enables the borrowers to minimize the impact of adverse rate movements and benefit in times of favorable changes.

There are two options you can opt for after the fixed rate period of your loan is over. One is either you opt for a lower percent of your loan amount as floating and higher percent of the loan amount as fixed and vice versa, or the other option is you take a 50:50 for both the rates. Example for both the types is given below.

A homebuyer decides to take a loan for Rs 80 lakhs. If he feels that the rates are likely to move upwards in the coming months, he can lock 60 percent at a fixed rate. The remaining 40 percent is exposed to floating rate fluctuations. In case the interest rate goes upwards, the part of the loan locked under fixed rate remains unchanged. However, in the event the rate drops, the borrower will benefit only on the 40 percent of the loan that is under the floating component.

Some borrowers may decide to lock their loan at 50:50 under fixed and floating . This is the safest bet for homebuyers who cannot predict the future direction of rate movements. So the Rs 80 lakh loan is actually treated as two loans of Rs 40 lakhs – one at a fixed rate and another at the prevailing floating rate of interest.

So, your bank might ask you to sign two separate loan agreements-one for fixed rate of interest and the other for floating rate of interest. However, many banks may combine the same and use a single agreement for both the components. You must read the terms and conditions of your agreements with utmost care and your relationship manager is bound to explain to you, if you do not understand them.

When should you foreclose or convert from one component to other?

Under Hybrid loans, many banks offer you the option of foreclosing the floating component if the interest rates move up, with or without any pre-payment fees. And if the interest rates move down, may foreclose the fixed part, with or without pre-payment penalty, as per banks policies. Other banks offer you facilities such as converting your fixed portion to floating if the interest rates move down and converting the floating rates into fixed, if interest rates move up. Of course you will be charged a certain amount of fees for doing so, which can more often than not, be negotiated.

Some examples of hybrid loans include State Bank of India’s offer of SBI-Flexi Home Loans, HDFC’s 2-in-1 Home, Part Fixed,-Part Floating loan by ICICI and Bank of Baroda’s Flexi-home loans.

Though RBI discouraged the hybrid home loans for a period of time, now they are back again after a break of two years. Hybrid loan is recommended to those who are not ready to accept the frequent fluctuations in the EMI or for those who have to get used to the home loan for a period of time.A hybrid loan bails a borrower out of the dilemma of choosing between a pure fixed and a floating product.

Compare personal loan interest rates – 2018

Compare Personal Loan Interest Rates – 2018

Compare personal loan interest rates and get aware of which lender fits in your budget. Know more and calculate and save maximum on your personal loan.

Personal loans are the loans which offer higher flexibility, and  can get them quickly as compared to the other loans available in the market. If you are undergoing a financial crisis and don’t have funds, then you can opt for personal loan. However, certain objectives cannot be fulfilled with personal loan.

Here is the list of purpose for which you can get the loan and the objectives which cannot be sufficed with it.

Purposes for which loan is given
Payment of credit card
Child education
Land purchase
Medical expense

Purpose for which loan is not given
Home construction
Business expansion

Personal loans similar to any other loan, also has an interest rate. However, different banks have different personal loan interest rates. Here is the list of the prominent banks and their offered personal loan interest rates.

compare personal loan interest rate
Compare personal loan interest rate via loanyantra.com


Bank Personal Loan Interest Rates
Citibank 10.99% – 16.49%
SBI Personal Loan 12.50% – 16.60%
HDFC Bank Personal Loan 10.99% – 20.00%
ICICI Bank Personal Loan 10.99% – 22.00%
RBL Bank 13.99% – 16.00%
Canara Bank 13.65% – 13.65%
Dena Bank 13.00% – 14.00%
Union Bank of India 14.40% – 14.40%
Vijaya Bank 12.50% – 13.50%
Andhra Bank 13.05% – 14.30%
Allahabad Bank 13.10% – 13.10%
Bajaj Finserv 11.99% – 15.50%
Standard Chartered Bank 11.49% – 20.00%
Bank of Baroda 11.60% – 16.60%
Corporation Bank 12.75% – 13.75%
IDBI Bank 13.20% – 13.75%
Indian Bank 14.35% – 14.85%
IDFC Bank 11.00% – 19.50%
Axis Bank 11.25% – 24.00%
Tata Capital 11.99% – 18.00%
Fullerton India 14.00% – 34.00%
IndusInd Bank 11.99% – 23.00%
Kotak Bank 11.50% – 24.00%
IIFL 12.99% – 19.99%
Yes Bank 11.99% – 20.00%
Bank of Maharashtra 15.10% – 15.10%
Federal Bank 13.32% – 15.12%
Indian Overseas Bank 12.70% – 15.25%
Syndicate Bank 14.20% – 14.20%
Karur Vysya Bank 13.90% – 16.40%
Punjab National Bank 12.25% – 15.25%

However, personal loans are the loans which rescue at the crux of any financial crisis. Lenders usually don’t ask the reason behind lending but look for the proper documents. Know more about genuine reasons to get personal loan..

Reasons to Get a Personal Loan

Why go through Loanyantra for a personal loan –

Loanyantra, an online platform for all your financial needs. It is the first ever fintech company to manage your loan till the closure. Usually, you find personal loan interest rates are a little higher when compared to any other loan interest rates. Here is when loanyantra helps you getting a personal loan at the best rate. Also avail wonderful offers like cashback and referral offers by getting a loan through loanyantra.com.



Rental Yield in India – Price to Earning Ratio in Real Estate

After 1 year of the demonetisation, the real estate prices remain the same, constant as they were in the past two years. But with the RERA getting diluted amidst the states, the builders could regain the lost effect on real estate prices.

Those who buy property as an investment—as different from those who buy to live in it—usually expect a twin benefit: a steady rental income and a rise in value. The ratio of the rental income to the price of the property is the rental yield. 

Gross Rental Yield = (Annual Rental Income / Cost of the Property ) * 100

If you have bought a property for Rs. 12,00,000 (12 Lakhs) and you earn a monthly rent of Rs. 10,000 then your Gross Rental Yield would be

Gross Rental Yield = (10000 * 12 / 1200000 ) * 100 = 10%

The rental yield can also be calculated on the net rental yield which means

Net Rental Yield = ((Annual Rental Income – Property Expenses) / (Cost of Property) * 100

The other expenses include property tax, maintenance cost, no rental period.

In a broader sense, it is calculated w.r.t gross rental yield, as the property expenses vary from place to place.

rental yield calculation
rental yield in India

Earlier were the days when there was the steep rise in property prices and the rental income couldn’t match up with the price. Relatively it is better  now in urban areas when compared with rural India.

Slowly, the Indian market took the uptrend w.r.t the rent making the rental yield a fruitful one for the real estate investors.

If you want to invest in a property, you always look at the location and the appreciation of the property over a longer period or even a shorter period.

It is worth investing in a property whose rental yield is high as you can be relaxed about your source of income.

For example, if you had taken a house ten years back which costed Rs.35lakhs. Now you want to give it for rent. So, in that case you calculate the present price of the property rather than the actual price you had bought for. Which means, it might cost around Rs. 70 lakhs over the ten years now. So, you consider the present price of the property and calculate the rental yield.

Why haven’t rentals kept pace when there was a steep price? It’s not as if there has been a drop in the demand for rented accommodation. Only that property prices have risen too high too fast, and to a lesser extent so has the supply of new houses. In some overheated pockets, such as Gurgaon and Noida near Delhi, the rental yield is down to 2-3%. A luxury condominium costing Rs 1 crore fetches a rent of Rs 20,000-25,000 a month. An independent house priced at Rs 2 crore will bring in Rs 30,000-40,000. The situation was no different in other cities where a large supply of residential housing had just entered the market or was nearing completion. Rental values have risen marginally.

In the stock markets, the dividend yield of a share falls as its price rises. A low dividend yield signals that the share is overvalued. More than the dividend yield, it is the PE (or price to earnings ratio) of a stock that is more widely used to determine a share’s value. Divide the earnings per share (EPS) with the current price of a share to arrive at the PE of a stock. Usually, a high PE means the share is overpriced; a low PE means it is cheap. To some extent. When the stock markets are at an all-time high, the average weighted PE of the 50 shares on the Nifty index is less than 21. It seems unlikely that rentals would move up in a hurry.

A massive stock of houses is under construction in almost every city. Some 245 million sq ft of residential space was ready in just the six metros. A good percentage of these houses were available for rent.

Areas within a city where there is no fresh supply of housing— fully developed areas or those in the central part of cities—continue to see higher rentals. Similarly, there are areas where the location advantage overrides other factors. For instance, an infrastructure improvement (a new bridge, road or train station) can make an area more attractive to those seeking a house on rent. Barring these exceptions, if you plan to buy a house for investment and hope for a monthly flow of income in the form of rent, you are better off checking other investment opportunities.