1. Build the all-in purchase worksheet
Begin with the written purchase price and list each additional charge separately. Include applicable stamp duty, registration, taxes, brokerage, lender charges, deposits and fit-out costs. Record the source and date for each input. An unknown amount should remain marked unknown rather than disappearing from the total.
Upfront cash is the amount you must fund yourself: the price and additional costs, less the loan actually disbursed, with timing taken into account. Do not assume a lender will finance every fee or the full asking price.
2. Compare the loan using its disclosures
Request the lender’s Key Facts Statement and repayment schedule. RBI’s KFS guidance describes the annual percentage rate as the annual cost of credit including interest and associated charges. Compare APR, fees, rate type, repayment terms and the monthly obligation, rather than choosing solely on the advertised interest rate.
A calculated EMI depends on the principal, rate and tenure supplied. A floating-rate loan, staged disbursement or changing repayment arrangement needs additional assumptions. The lender’s current offer remains the reference for the actual contract.
3. Calculate yield with a declared denominator
Gross rental yield (%) = annual rent ÷ purchase price × 100. In an illustrative example, ₹20,000 monthly rent produces ₹2,40,000 annual rent. Dividing by a ₹60,00,000 purchase price gives 4%. These numbers demonstrate the calculation; they are not a current market claim.
If you use an all-in acquisition cost as the denominator, label that basis clearly. For an operating yield, subtract assumed vacancy and recurring property expenses from rent before dividing by the declared cost. Financing and personal taxes change investor cash flow separately.
4. Test a downside before committing
Compare a base scenario with lower rent, a vacant period, higher maintenance and a higher loan payment where relevant. Keep the assumption beside every result. A positive gross yield can coexist with negative monthly cash flow after repayments.
Ask how long you could meet payments with no rental income and what a delayed exit would mean for your savings. A future sale value is an assumption, not an assured way to repay the loan.
- Rent evidence: dated comparable properties, with differences recorded.
- Expense evidence: written society, manager or seller estimates.
- Loan evidence: current KFS and repayment schedule.
- Reserve: your own stated cash buffer, separate from expected appreciation.