Real Estate vs. Market — Cost-Benefit Analysis

Property

Financing

Pre-EMI: only interest on the amount disbursed so far is paid during construction; the full EMI tenure begins fresh once construction completes. Full EMI: repayment starts immediately on each disbursement, recalculated every quarter, and counts against the same tenure from the first disbursement.

Rental Income

Appreciation & Ageing

Alternative Investment

Same initial capital (down payment + transaction cost) is assumed invested at this rate. Any net rental surplus or shortfall each year is also reinvested/drawn at this rate in both scenarios, so the comparison isolates the property's own economics.

Taxation

Let-out property: 30% standard deduction on rent, plus full interest deduction (no ₹2L cap — that only applies to self-occupied property), at your slab rate. Interest paid during construction is not deducted in the year paid — by law it accumulates and is deducted in 5 equal instalments starting the year construction completes. A net loss here is treated as an immediate tax shield (simplification — ignores the ₹2L/yr set-off cap and further carry-forward). Capital gains: property at a flat 12.5% (no indexation, per rules for property acquired after 23 Jul 2024), market alternative at 12.5% above a ₹1.25L exemption, both applied once at exit. Municipal taxes and Section 80C principal repayment are not modelled. This is a planning approximation — confirm current rates with your tax advisor before relying on it for a client.