Low rentals, high civic taxes hit luxe flat investors
Investors who bought luxury apartments, hoping property prices would appreciate and they would earn fabulous rents, now face a harsh reality. Not only have prices stagnated or dropped, but rental incomes from such flats are low. A glut of high-end apartments, mainly in central Mumbai, has left tenants with a wide choice of properties to choose from. As a result, rents for large apartments have crashed by 20%, and in some cases up to 30% and more. In new buildings, high outgoings and maintenance charges, added with tax on rental income, have left owners with little in hand. A developer cited the example of a Rs 5-crore apartment, which currently fetches a rent of Rs 1 lakh a month. “But after deducting the outgoings and 22% tax on rental income, the owner gets a measly Rs 56,000 in hand. The yield is barely over 1% annually on such an expensive property,” he said. “It’s true. Home owners who have leased big apartments are left with little in hand,” said Pranay Vakil, chairman of Praron Consultancy. To create demand for rental housing, leading developers have set up separate cells within their organisations to cater to leave-and-licence demand for flats bought by their investors. They have even drawn up standard agreements that can be quickly signed by someone who wants to move in quickly, saving on expenses on lawyers.
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