Is Property Rent A Good, Steady Source Of Income?

Written by Suresh Sadagopan

If one wants to avoid getting entangled in the emotional aspects of real estate investing & make financially sound decisions , it is imperative that these real estate myths be recognised & dismissed. In this info-bite, we will debunk a fondly held myth in respect of property investment.

Properties can be rented out. But there are two problems. Property rental yields are very low in India. A residential property costing, say, Rs.1 Crore can be rented for, say, Rs.25,000 – 30,000 a month. After paying society charges, property tax & Income tax, the rental yield comes to just 2% or less. So, If someone wants a good income stream from their investment, property would not be able to offer that. In this situation, property is like a FD that yields 2%!

There are many other hassles in a property. Even this 2% yield will be there only if there is continuous occupancy. However, when one tenant leaves there is invariably a lag to get another tenant. This means that there would be periods in between when there will be no income at all! Also, when one tenant leaves, there will be some repairs / painting to be done. Finding a good tenant would be another challenge. One may have to employ the services of a broker & brokerages would have to be paid, which is an added cost. Over time, one also needs to contribute towards building upkeep & repairs in which the property is situated. Hence, there are several expenses which come up during the lifetime of a property.

A simpler way to setup a regular income would have been to invest the money in a financial asset, say a simple FD, and get much more with a lot less hassles.