« Highest Paid Hedge Fund Managers
Fortune: Bloomberg’s money machine »

Bangalore Real Estate: A new record for the Price/Rent ratio

After seeing EMI/Rent ratios between 3 and 4, I now came across a new “high”, thanks to Craigslist:

Rent @ Rs 20,000 per month: 3 BHK (Bedroom-Hall-Kitchen) apartment, 1566 sq ft . (The ad says 23k but that’s for a fully-furnished place, so I discounted it to 20k.)

OR

Buy @ Rs 8,600,000: Similar 3 BHK apartment in the same housing complex.

Using HDFC’s home loan calculator, the equated monthly installment (EMI) for the “buy” scenario with 100% financing works out to Rs 100,000 per month - based on a 20-year loan period and a fixed interest rate of 13%. Note that the “buy” price doesn’t even include stamp duty & registration fees (which usually add another 10%).

The EMI / Rent ratio thus comes to 5; or the Price / Rent ratio is  ratio is 86 lakhs purchase price / 2.4 lakhs annual rent = 36!

This entry was posted on Thursday, April 12th, 2007 at 10:21 am and is filed under real-estate. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Related Posts:

  • Bangalore Real Estate: Broker markup or Rent deflation?
  • Bangalore Real Estate: Yet Another Price/Rent ratio of 5
  • Bangalore Real Estate: Yet Another Buy vs. Rent Data Point
  • Bangalore Real Estate: Has the “discounting” begun?
  • Bangalore Real Estate: “Rent or Buy” Part II
    •

    4 Responses to “Bangalore Real Estate: A new record for the Price/Rent ratio”

    1. Sukrit Says:
      April 12th, 2007 at 10:39 am

      For your perusal:

      http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=2&oref=slogin&oref=slogin

      http://www.informationclearinghouse.info/article17512.htm

    2. Falkor Says:
      April 13th, 2007 at 4:01 pm

      The ratio makes sense.

      Thanks for C&H, its been boring boring couple of days at office.

    3. Tony Says:
      October 6th, 2007 at 10:27 am

      True. In tier 2-3 cities I had a thumb rule of 300 times rent collection as a buildings worth.

    4. Tony Says:
      October 6th, 2007 at 10:28 am

      which will roughly be a 60 Lac apartment. Any thing above that doesnt make any sense as a investment purchase. For own house, it is entirely diffrent issue.