The calculator computes effective gross rent by applying a vacancy discount (5-10% in most Indian metros) to your full-occupancy rent. From this it subtracts operating expenses: property tax (typically ₹3,000-15,000/year), insurance (₹2,000-8,000/year), maintenance reserve (1-1.5% of property value annually), society fees (₹30,000-1,20,000/year depending on amenities), and management fees if you hire a broker/manager (typically one month's rent per year, ~8%). The result is Net Operating Income (NOI) - what the property earns on a fully-loaded basis before financing.
Cap rate = NOI / Purchase price. This is the unleveraged return - what you'd earn if you bought the property in cash. Indian residential cap rates are typically 1.5-3%, far below commercial (5-8%) or land (variable). Cash-on-cash return = (NOI − Annual EMI) / Down payment. This is the actual cash return on the cash you've invested, post-financing. It's frequently negative for new-construction Indian residential because the EMI exceeds NOI.
Appreciation is the third return component, separate from cash flow. Indian residential appreciation has been 4-7% per year over the long term, varying sharply by city, tier, and project. Add expected appreciation to cash-on-cash for a total expected return. A property with -3% cash-on-cash and 7% appreciation is still a 4% return investment - modest but possibly competitive with FDs if you have a long horizon and high tax slab benefiting from interest deduction.
