RENT OR REINVEST? WOULD YOU SELL A RS 5 CR MUMBAI FLAT FOR A 10-YEAR INVESTMENT PLAN?
I own a residential property in Mumbai, currently valued at Rs 5 crore. I have two options: either rent it out or sell it and reinvest the proceeds. I’m trying to evaluate what would be the more financially sound decision over the next 10 years.
If I choose to rent it, I estimate the yield would be around 2–3% annually, which isn’t particularly attractive when compared to other investment avenues. The upside is I retain ownership of a high-value asset in a prime location, which could appreciate further. But I also have to consider upkeep, tenant management, and the opportunity cost of not deploying the capital elsewhere.
The other option is to sell the property. After accounting for capital gains tax, I expect to have around ₹4 crore in hand. I’m considering investing this in a well-diversified portfolio—possibly a mix of equity mutual funds, debt instruments, or even REITs—for better returns and liquidity. I’m also open to exploring commercial real estate, which may offer higher rental yields (6–9%) but comes with different risks.
I’m looking for advice from anyone who has faced a similar decision. What worked for you? Which route offers better returns and stability over a 10-year horizon?
Advice by Animesh Hardia, Senior Vice President, Quantitative Research at 1 Finance
Making a decision about your ₹5 crore Mumbai property is a significant financial crossroads-and it’s not one to take lightly or base solely on others’ experiences. While outside perspectives can be helpful, your unique circumstances and goals should be at the heart of this choice.
To guide your thinking, start by reflecting on these key questions:
1. What is your money behaviour?
Do you gravitate towards traditional assets like real estate, gold, or fixed deposits, or are you open to higher-risk, unconventional investments? Are you the disciplined, patient type, or do you make quick decisions? If price swings make you anxious, that’s a crucial factor - your investment temperament should weigh as much as potential returns.
2. What is your current life stage?
Your age and career outlook play a big role. For instance, someone in mid-career with rising income and job mobility may approach this decision differently than someone nearing retirement seeking stability.
3. What’s the purpose of this wealth?
Is your ₹5 crore property (or ₹4 crore post-tax corpus) meant to fund your financial freedom (Generation 2), or is it surplus capital you’re willing to risk for higher growth (Generation 3)? Your answer will depend on your perception of money.
4. What are your financial goals over the next 10 years?
Do you need liquidity for upcoming goals, or can you afford to lock in your money for the long haul? Real estate can tie up capital, while a diversified portfolio offers flexibility to respond to life’s surprises or opportunities.
5. What’s the outlook for Mumbai real estate?
According to the 1 Finance Mumbai Housing Total Return Index, Mumbai real estate has delivered an average total return of 6.7% per annum over the last decade (up to March 31, 2025), factoring in both price appreciation and rental yield. This is an average across all regions - some localities have outperformed, while others have lagged. Even though your current rental yield of 2-3% is below what other investments might offer, location-specific appreciation could help close that gap.
However, the city’s steady build-up of unsold inventory and varying performance across neighbourhoods means that without specifics about your property, it’s difficult to make a definitive call on selling versus renting.
Now, let’s talk about diversification - a powerful strategy for wealth preservation and growth. 1 Finance’s macro research team finds that the long-term correlations between major asset classes are low:
- Equity and Debt: 0.12
- Equity and REITs/InvITs: 0.03
- Debt and REITs/InvITs: -0.01
- Equity and Gold: -0.04
- Debt and Gold: -0.01
These low correlations mean that by blending asset classes, you can achieve more stable returns with less volatility than by concentrating your wealth in a single asset like real estate. A balanced portfolio is better equipped to weather market ups and downs, giving you both peace of mind and financial flexibility.
Rent or sell:
Whether you choose to rent or sell should ultimately reflect your personal circumstances, financial goals, and comfort with different investment strategies. Consulting a qualified financial advisor can help you analyse your situation in depth and create a plan that aligns with your needs.
Remember, the best financial decision is one that lets you sleep well at night while steadily moving you toward your long-term goals.
2025-05-20T12:05:51Z
