Investing money: Home or FD?

Hello Ladies!

I have done my analysis on whether to invest in RE (3BHK residential apartment in Chennai) for rent or park the funds in NRE FD for 5 years. For the ease of calculation let’s say I have a capital of Rs.1 Crore. My investment horizon is 5 years.

RE: Buying a 3BHK apartment in an upcoming area in Chennai for Rs. 1 crore will cost me additional 11% of the property value for registration, stamp duty, broker fees, service tax, electricity, water connections, misc fees, car parking etc. Additionally I have to consider maintenance of the property which includes insurance, at least one whitewash during 5 years, rework and patch fixing etc which can be roughly 2.5 lakhs (believe me). So the total cost of the property is 100+11+2.5 = 113.5 lakhs. I will get rent of Rs.25,000 pm average. If I open a recurring deposit account to deposit that rent amount for 60 months with 8.5% yield I will get a total of 18.7 lakhs on maturity. I guess the property prices appreciation is about 8-9% p.a in Chennai (correct me if I’m wrong). Given that I can expect the property price to reach 145 lakhs after 5 years. So the net profit here is (145+18.7-113.5=50.2 lakhs profit). Not incl. long term capital gains tax.

FD: Assuming I’m not buying the flat, but instead parking my funds of 113.5 lakhs in NRE FD for 5 years with 8.5% interest and no tax for NRE, the maturity value is 172.8 lakhs. So the net profit is 172.8-113.5 = 59.3. This amount is readily available for me then without any hassle and importantly 100% repatriable. So 9 lakhs or 9% more profit in FD than in RE. Even if the property price appreciates 55%, will there be buyers who will be able to afford 155 lakhs + 11% charges which will be around 1.7 crores? Can the middle class and upper middle class people afford that much then?

Please comment on my analysis and put your thoughts too. I’m I missing some key part of investment benefits in RE? I did not consider mortgage (like taking 75% loan) because the interest rate is 10.15% which is more than FD interest.

Thanks!

Investing money: Home or FD?