How to Calculate ROI on Real Estate: Formula and Worked Example
Return on investment sounds simple but is routinely miscalculated because holding costs, stamp duty and financing are left out. This page sets out the full formula, a worked cash-versus-leveraged comparison, and a link to run your own scenario instantly.
Core ROI formula
1
Acquisition cost drag (stamp duty etc.)
5–7%
Leverage impact on equity ROI
2x
Typical hold for ROI to normalise
5–8 yr
What the data says
ROI = [(Sale price − Total cost + Net rent received) ÷ Total cost] × 100, where total cost includes purchase price, stamp duty, registration, brokerage and holding costs.
Worked example: ₹1.5 Cr flat, ₹10.5L acquisition costs, held 5 years, sold at ₹2.1 Cr after ₹22L net rent received. Total cost = ₹1.605 Cr. ROI = [(2.1 Cr − 1.605 Cr + 0.22 Cr) ÷ 1.605 Cr] × 100 ≈ 45.5% over 5 years.
Leverage changes equity ROI materially: the same asset bought with 60% loan-to-value can show a substantially higher return on the equity actually deployed, though this must be compared against the EMI/interest cost.
Use /knowledge/calculators/roi to model your own purchase price, holding period and financing structure without manual spreadsheet errors.
How EstateVeda executes this
Capture every acquisition cost — stamp duty, registration, brokerage, legal fees — not just the base price.
Track net rental cash flow received across the hold period, after tax and expenses.
Compute exit proceeds net of brokerage and any prepayment penalty on financing.
Annualise the ROI figure (see CAGR) for comparison against alternative asset classes.
Risks we underwrite against
Quoting ROI on sale price alone, ignoring acquisition and holding costs, overstates returns by several percentage points.
Comparing an unlevered ROI on one asset against a levered ROI on another produces a misleading comparison.
EstateVeda verdict
Always compute ROI on fully loaded cost, and always state whether the figure is levered or unlevered before comparing across assets.
Frequently asked questions
What is a good ROI for real estate in India?
A total ROI (rent plus appreciation) of 10–14% annualised over a 5–7 year hold is considered strong for Indian residential real estate, though this varies sharply by corridor and entry timing.
Does ROI include rental income?
A complete ROI calculation must include net rental income received during the hold, not just capital appreciation at exit — otherwise the figure understates true return.
How is ROI different from CAGR?
ROI is a total percentage return over the entire hold period; CAGR (see /knowledge/calculators/cagr) annualises that return, making it comparable across different holding periods.