Costly Real Estate Lesson: NRI’s Hyderabad Flat Returns Just 0.5% in 13 Years

Hyderabad, India – A non-resident Indian (NRI) recently shared a sobering lesson in real estate investing, shedding light on how property purchases in booming urban centers might not always yield lucrative returns. In a case that has sparked conversations around the true return on investment in Indian real estate, the NRI revealed that a flat purchased in Hyderabad for Rs 64 lakh in 2010 has appreciated by just Rs 5 lakh in 13 years, translating to a dismal return of merely 0.5% annually.

The Investment

The apartment, located in Hyderabad—a city often lauded for its rapid development and tech industry growth—seemed like a promising investment when purchased in 2010. Priced at Rs 64 lakh at the time, the location and market sentiment pointed towards significant appreciation over time.

However, contrary to expectations, the property now commands a market value of just Rs 69 lakh. When accounting for inflation, taxes, maintenance costs, and opportunity cost, the investment clearly underperformed not just mutual funds or stocks but even conservative saving instruments like fixed deposits.

The Hidden Costs

One of the reasons behind the poor return is the often-overlooked hidden costs associated with property ownership. Over 13 years, the owner paid significant amounts toward maintenance fees, property tax, and unavoidable expenses like repairs. Additionally, with the flat mostly remaining unoccupied, no rental income was generated to offset these costs.

The lack of occupancy also took a toll on the flat’s condition, leading to further expenses when trying to put it on the market for resale. Combined, these ongoing costs further diluted the effective return on the initial investment.

Lessons for Investors

This case serves as a cautionary tale for other NRIs and domestic investors considering real estate as a passive by-default appreciation asset. While property historically has been seen as a “safe” or “tangible” investment, the realities of urban oversupply, demographic shifts, regional market performance, and liquidity challenges can all hamper actual returns.

Moreover, unless a property generates consistent rental income or is bought at significantly undervalued prices, real estate may not outperform other asset classes, particularly after adjusting for inflation and cost of capital.

The Shift in Investor Mindset

With increased financial literacy and a growing array of investment vehicles like index funds, REITs, sovereign gold bonds, and digital wealth platforms, investors are beginning to question traditional assumptions. The emphasis has shifted from mere asset accumulation to actual return on invested capital and asset performance over time.

Conclusion

The Hyderabad flat’s underwhelming performance over 13 years acts as a stark reminder that not all real estate is created equal. For NRIs and others looking to invest from afar, it’s critical to conduct thorough due diligence, assess net yields, and consider alternative investments that might deliver better returns with fewer hassles.

While real estate still has its place in diversified portfolios, particularly when the location and demand dynamics are right, it’s no longer the infallible wealth-creating vehicle it was once assumed to be.