The costs nobody includes
Entry costs are paid once and never recovered, holding costs run every year whether or not anyone lives there, and exit costs arrive when you are least able to negotiate. Together they decide whether a gain was real.
Chapter 2 · Beginner
Property's reputation as an investment survives largely because its costs are invisible in the way its price is not. The price is one number everybody knows. The costs arrive in a dozen pieces, years apart, and nobody adds them up.
Three kinds, and the difference matters
Entry costs are paid once, at purchase, and are never recovered. They are not part of the asset — they are the price of acquiring it. A property must appreciate by the whole of the entry cost before the owner is level.
Holding costs run every year, whether or not the property is occupied, let, or useful to anyone.
Exit costs arrive at sale, when your bargaining position is usually weakest.
Entry
Stamp duty and registration. A state subject, so the rate varies by state and sometimes by the buyer's circumstances. It is typically the largest single entry cost and in most states runs to several per cent of the transaction value. Check your own state's current rate rather than any figure you remember, because states revise them and concessions come and go.
Brokerage, commonly around one to two per cent, often payable by both sides.
Legal and due diligence — title search, document verification. This is the cheapest insurance in the whole transaction and the one most often skipped.
Loan processing and documentation, where borrowed.
Interiors and fit-out, which people exclude on the grounds that they are "improvements". They are money spent that must be recovered from the sale price like any other.
The entry cost is therefore not a rounding error. On a transaction where stamp duty and registration are, say, six per cent and brokerage one, the property must rise by about seven per cent before the owner has broken even — and that is before a single year of holding cost.
Holding
Maintenance and society charges, monthly, rising over time, and payable whether the flat is occupied or empty.
Property tax, annual, levied by the municipal body.
Repairs and renewal. The structure depreciates, as chapter 1 set out, and this is what arrests it. A property that has not been maintained for fifteen years has a visibly lower value, and the deferred maintenance is simply a cost moved to the sale.
Insurance, where taken.
Vacancy, if let — the months between tenants, when costs continue and rent does not.
Income tax on rent, if let, under the rules the Tax subject covers.
Holding costs are what make an empty property expensive. An unlet flat is not a neutral store of value: it consumes maintenance, tax and repair every year while earning nothing.
Exit
Brokerage again.
Capital gains tax on the gain, computed under the Income-tax Act 2025 — the Tax subject's capital gains chapter is the authority, and note that section numbers from the repealed 1961 Act no longer cite live law.
The cost of time. Property does not sell on demand. Weeks or months of marketing, during which holding costs continue, and a seller who needs the money quickly accepts less. Chapter 7 treats this as the central risk rather than an inconvenience.
Repairs demanded by the buyer, and the discount for anything not fixed.
What the regulator's holding period tells you
SEBI requires a REIT to hold a completed, rent-generating property for "a period of not less than three years from the date of purchase".
That minimum exists for several reasons, but one of them is instructive for an individual: in an asset with entry and exit costs this large, short holding periods destroy value mechanically. A professional vehicle is forbidden from trading property in and out. An individual is not forbidden, merely punished.
Working the problem
Bought ₹60 lakh, sold ₹84 lakh eight years later. Gross gain ₹24 lakh, or 40%.
Assumptions stated: stamp duty and registration 6%, brokerage 1% each way, legal ₹25,000, maintenance ₹3,000 a month rising to ₹5,000, property tax ₹12,000 a year, repairs ₹2 lakh over eight years. No loan, and the flat was lived in rather than let — so no rent received, and no rent-avoided credited either, because the question asks what was cleared in cash.
| Item | Amount |
|---|---|
| Stamp duty and registration, 6% of ₹60 lakh | ₹3,60,000 |
| Brokerage on purchase, 1% | ₹60,000 |
| Legal and due diligence | ₹25,000 |
| Maintenance, ~₹4,000 a month average × 96 months | ₹3,84,000 |
| Property tax, ₹12,000 × 8 | ₹96,000 |
| Repairs and renewal over eight years | ₹2,00,000 |
| Brokerage on sale, 1% of ₹84 lakh | ₹84,000 |
| Total costs | ₹12,09,000 |
Gross gain ₹24,00,000 less costs ₹12,09,000 leaves about ₹11,91,000 before capital gains tax. After tax the figure is lower again.
As a return: roughly ₹11.9 lakh on ₹63.6 lakh actually committed at entry, over eight years — about 2.1% a year before tax. The headline price rise of 40% over eight years was about 4.4% a year.
How many years of growth did the costs consume? The costs are ₹12.09 lakh against a purchase price of ₹60 lakh, or about 20% of the purchase price. At the 4.4% a year the property actually appreciated, 20% takes roughly four and a half years to generate. More than half the holding period went to paying for the privilege of holding it.
Two honest qualifications. The owner also lived there for eight years and avoided eight years of rent, which is a large benefit this calculation deliberately excludes because the question asked what was cleared in cash — chapter 3 is where that belongs. And had they borrowed, the return on their own money could be much higher or much lower, which is chapter 4.
The lesson is not that property is a bad investment. It is that the costs are roughly a fifth of the purchase price over eight years, they are invisible unless listed, and any comparison that omits them is not a comparison.
The point
Entry costs are paid once and never recovered, so a property must appreciate by the whole of them before the owner is level; holding costs run every year whether or not anyone lives there, which is what makes an empty flat expensive; and exit costs arrive when the seller is least able to negotiate. On a typical eight-year hold they can total around a fifth of the purchase price, consuming several years of price growth. SEBI's three-year minimum holding period for a REIT's completed property reflects the same arithmetic, applied to professionals who are forbidden to trade in and out rather than merely punished for it.
Check yourself
4 questions. Every answer is explained afterwards, including the ones you get right — guessing correctly is not the same as knowing. Score 70% or more and the chapter is marked done.
Question 1 of 4
0 of 4 answered. You can submit with questions unanswered — they simply score zero.
Now do it with your own numbers
A flat bought for ₹60 lakh is sold eight years later for ₹84 lakh. Build the full cost list and estimate what the owner actually cleared, stating your assumptions. Then say how many years of price growth the costs consumed.
Separate costs into paid once at entry, paid every year, and paid at exit. Express the total as a percentage of the purchase price before annualising.