stamp duty on a property purchase is charged on

The higher of the price stated in the documents and the circle rate notified for that locality. So agreeing a price below the notified value does not reduce the duty, and the income tax rules separately treat a significant shortfall against that value as income in the buyer’s hands, within the tolerance band the Act allows. Rates and notified values are set by each state and revised periodically, so look up the figure that applies where the property is.

a flat that doubled in nine years is how much return per year

About 8% a year — and that is before a single cost is deducted. The headline multiple excludes stamp duty and registration paid on day one, brokerage, interiors, nine years of society maintenance, property tax and repairs, the months the flat stood empty, any loan interest, and the brokerage and capital gains due on exit. Put all of those into a dated schedule and the XIRR that comes out is materially lower, and it is the only figure comparable with a fund’s stated return.

how do I compare a second flat with an equity portfolio on the same basis

Compute the XIRR of every dated cash flow on both sides rather than comparing sale price divided by purchase price against a fund’s annualised return. For the property, the outflows are the down payment, stamp duty and registration, each EMI, interiors, maintenance, property tax and repairs on the dates they were actually paid; the inflows are rent actually received net of vacant months and the sale proceeds net of brokerage and tax. Run the same exercise on the portfolio, net of charges and taxes paid, and the two numbers finally measure the same thing.

how do I work out the real rental yield on a flat

Divide the rent actually received in a year by the capital genuinely employed — which includes stamp duty, registration, brokerage and interiors, not just the headline purchase price — then subtract society maintenance, municipal property tax, insurance and repairs to get the net figure. Vacancy is the line most often ignored: a flat let for ten months out of twelve earns an effective yield about 17% below the one on the advertisement. Those running costs are paid whether or not there is a tenant.

Buying a second property versus investing

At a wedding in December an uncle mentions that the plot he bought on the outer ring road in 2016 has "more than doubled". Everyone at the table nods, and somebody asks you when you are going to buy something. Nobody asks what your portfolio has done, and if you told them, the number would land as an opinion rather than as a fact. Two weeks later a builder’s launch offer arrives with a payment plan, and the conversation at home begins with the sentence that has started this decision in Indian households for two generations: at least it is something solid.

This lesson is not an argument against property. It is an argument against the comparison, because the two numbers being put side by side are not measuring the same thing — and almost the entire psychological pull comes from the difference between them rather than from the assets themselves.

Think of it like this

Two shops, two price boards

Two shopkeepers own equally good businesses. One has a board outside that updates his shop’s valuation every minute, all day, in red and green. The other has a board that updates roughly once every seven years, when a neighbouring shop happens to change hands. Ask the neighbourhood which of the two businesses is riskier and the answer is unanimous, and it is a fact about the boards.

In the market

Equity is quoted continuously and property is quoted almost never. The variability of what your flat is worth is not smaller than that of a portfolio; it is unobserved. Perceived risk tracks how often you are shown a number, and the flat shows you one twice a decade.

What the absence of a quote actually does

A portfolio that fell 34% and recovered will have shown you every step of the fall, and you will remember it. A property that fell 34% and recovered over the same period showed you nothing at all — there was no transaction, so there was no number. Both journeys happened. Only one produced the experience that makes people abandon plans.

Putting the two returns on the same basis

The number quoted at the wedding is almost always sale price divided by purchase price. The number you would quote for a portfolio is net of costs, net of tax and time-weighted. Comparing them is not a close call — it is a category error. To fix it, every rupee that left your pocket and every rupee that came back has to be in the calculation, dated.

Acquisition costs. Stamp duty and registration, which vary by state and by the buyer’s category; brokerage; legal and documentation charges. These are paid on day one and never appear in the headline return.
Everything spent to make it usable or lettable. Interiors, fittings, repairs on possession. Households routinely exclude this on the grounds that it was "for the house", which is exactly how it disappears from the arithmetic.
Annual running costs. Society maintenance, municipal property tax, insurance, and repairs. These recur for the whole holding period, and they are paid whether or not there is a tenant.
Vacancy and collection. A property let for ten of the twelve months has an effective yield 17% lower than the one on the advertisement. Over a decade, the months between tenants add up to a meaningful fraction of the total rent.
Financing. If there is a loan, the interest paid across the years is part of what the asset cost you, and it is usually the single largest omitted item.
Exit costs and tax. Brokerage on the sale, and capital gains, with the treatment for immovable property differing from that for listed shares in holding period, in the availability of indexation and in the specific reinvestment reliefs available. Look the current position up; do not carry a rule of thumb from a decade ago.

XIRR( every dated outflow and inflow, from booking to sale )

Outflows: Down payment, stamp duty, registration, each EMI, interiors, maintenance, property tax, repairs — each on the date it was actually paid
Inflows: Rent actually received net of the months vacant, and the sale proceeds net of brokerage and tax
Why XIRR: The cash flows are irregular in both timing and size, so a simple start-to-end multiple cannot describe them

Example: A flat that "doubled in nine years" is a 100% headline return, which is about 8% a year before anything is deducted. Put the stamp duty, the interiors, nine years of maintenance and property tax, the vacant months and the interest into the same schedule, and the figure that comes out is the one comparable with a fund’s return. It is a different number, and it is the only honest one.

Worked example

The same flat, headline and honest

Illustrative arithmetic — the point is which lines exist, not the amounts

Purchase priceThe number everybody quotes₹60,00,000

Stamp duty, registration, brokerageRates are set by the state and revised; look up the one that appliedSeveral lakh, paid on day one

Interiors and fittings before lettingAlmost always excluded from the family’s version of the returnA further large one-off

Annual maintenance, property tax, repairsSmall individually and substantial across a decadeRecurring, every year, tenant or not

Rent receivedThe advertised yield assumes twelve months of twelveNet of the months it stood empty

Sale price nine years laterThe "it doubled" figure, and the only one that gets repeated₹1,20,00,000

Headline returnBefore every line above100%, about 8% a year

What the XIRR of the actual cash flows givesHow much lower depends entirely on the omitted lines, which is the whole pointMaterially lower

Nothing here says the flat was a poor decision. It says that the number used to describe it at the wedding is not a return, and that the honest version has to be computed from the bank statements rather than remembered. Do the same exercise for the portfolio — including the charges, the taxes paid and the money that sat idle between purchases — and you will have two figures that can genuinely be compared.

Loading interactive demo…

The same machinery works for the second property. What matters is not the answer the tool gives but which inputs you had to go and find.

Two Indian mechanisms worth understanding before, not after

In the Indian market

Every state notifies a minimum value for property transactions by locality — the circle rate, also called the ready reckoner rate or guidance value. Stamp duty is charged on the higher of the documented price and this notified value, and the income tax provisions dealing with immovable property key off the same figure, treating a significant shortfall as income in the hands of the buyer and adjusting the seller’s consideration, subject to a tolerance band set in the Act. Two consequences follow for a real decision: in a falling local market where the market price has dropped below the circle rate, a sale can carry a tax and duty cost calculated on a value nobody is actually paying — and a locality where the circle rate has recently been revised upward has had its transaction costs raised without anything changing about the property.

The concentration nobody counts

Set the psychology aside for a moment and look at the balance sheet. For a large share of Indian households, the home is already the majority of net worth. Add a second property and the figure often passes 80%. Now note where the income that services the loan comes from: a job or a business, frequently in the same city, exposed to the same local economy that sets the property price.

What each asset genuinely provides

The second property

A use value, if it is for a child, a parent, or a return to a home city
Rental income, at a yield that is typically modest against the capital employed
Behavioural protection through the absence of a visible price
Concentration in one city, one micro-market and one legal title
An exit measured in months, at a price set by one buyer

The equivalent sum in a portfolio

No use value whatsoever, which is a real and often decisive disadvantage
Divisible — sellable in exactly the amount required
A quoted price every day, with everything that does to behaviour
Diversification across companies, sectors and, if you choose, countries
Costs that are visible and small, against costs that are invisible and are not

Check yourself

A relative’s flat "doubled in nine years" while your equity fund quotes a lower annualised return over the same period. What is the most accurate reading?

Simple bhasha mein

Jiska bhaav roz nahi dikhta

Shaadi mein chacha bolte hain plot "double ho gaya" — aur sab sar hilate hain. Us number mein stamp duty, registration, interiors, das saal ka maintenance aur property tax, khaali mahine, aur loan ka interest — kuch bhi nahi hai. Flat safe isliye nahi lagta ki gira nahi; isliye lagta hai ki bhaav dikhta hi nahi. Yeh chup rehna sach mein ek faayda hai — par woh sabar ka faayda hai, return ka nahi.

What to remember

Property feels safer largely because it is never marked to market; that is a fact about the quote, not about the asset.
The absence of a visible price is a genuine behavioural benefit — it belongs under temperament, not under returns.
A comparable return requires XIRR over every dated cash flow: duty, interiors, maintenance, tax, vacancy, interest and exit costs.
Circle rates set a minimum transaction value for both stamp duty and tax, which matters most in a weak local market.
The real question is what share of one household’s net worth belongs in a single indivisible, locally concentrated asset.

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Up nextThe commitments that renew themselves Previous: Choosing what to sell when you need the money

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Common questions

Short, direct answers to what people ask about this topic.

circle rate meaning in property: The circle rate is the minimum value a state government notifies for property transactions in a given locality — also called the ready reckoner rate or the guidance value. Stamp duty is charged on the higher of the documented price and this notified value, and the income tax provisions dealing with immovable property key off the same figure, subject to a tolerance band set in the Act. It bites hardest in a weak local market, where a sale can carry duty and tax computed on a value nobody is actually paying.
stamp duty on a property purchase is charged on: The higher of the price stated in the documents and the circle rate notified for that locality. So agreeing a price below the notified value does not reduce the duty, and the income tax rules separately treat a significant shortfall against that value as income in the buyer’s hands, within the tolerance band the Act allows. Rates and notified values are set by each state and revised periodically, so look up the figure that applies where the property is.
a flat that doubled in nine years is how much return per year: About 8% a year — and that is before a single cost is deducted. The headline multiple excludes stamp duty and registration paid on day one, brokerage, interiors, nine years of society maintenance, property tax and repairs, the months the flat stood empty, any loan interest, and the brokerage and capital gains due on exit. Put all of those into a dated schedule and the XIRR that comes out is materially lower, and it is the only figure comparable with a fund’s stated return.
how do I compare a second flat with an equity portfolio on the same basis: Compute the XIRR of every dated cash flow on both sides rather than comparing sale price divided by purchase price against a fund’s annualised return. For the property, the outflows are the down payment, stamp duty and registration, each EMI, interiors, maintenance, property tax and repairs on the dates they were actually paid; the inflows are rent actually received net of vacant months and the sale proceeds net of brokerage and tax. Run the same exercise on the portfolio, net of charges and taxes paid, and the two numbers finally measure the same thing.
how do I work out the real rental yield on a flat: Divide the rent actually received in a year by the capital genuinely employed — which includes stamp duty, registration, brokerage and interiors, not just the headline purchase price — then subtract society maintenance, municipal property tax, insurance and repairs to get the net figure. Vacancy is the line most often ignored: a flat let for ten months out of twelve earns an effective yield about 17% below the one on the advertisement. Those running costs are paid whether or not there is a tenant.