About the Commercial ROI Calculator
What is the Commercial ROI Calculator?
Offices and shops are bought for their rent, which usually rises by a fixed escalation every year or every few years. The right measure of commercial property ROI combines that rising income with the sale value at exit.
This calculator builds the yearly cash flows – purchase with costs, net rent growing at the escalation rate, then the sale – and solves for the internal rate of return (IRR), the true annual return.
How to use the Commercial ROI Calculator
- Purchase Price (₹) (sample: 2,50,00,000)
- Stamp Duty & Purchase Costs (%) (sample: 7)
- First-Year Rent (₹) (sample: 20,00,000)
- Rent Escalation (% per year) (sample: 5)
- Expenses & Vacancy (% of rent) (sample: 12)
- Property Price Growth (% per year) (sample: 4)
- Holding Period (years) (sample: 10)
- Press Calculate Commercial Property ROI (results also refresh as you type). The result card shows the Annual Return (IRR), along with Net yield in year 1, Total net rent received, Estimated sale value at exit and Total profit.
Formula used
0 = −Investment + Σ Net rentₜ ÷ (1 + IRR)ᵗ + Sale value ÷ (1 + IRR)ⁿ
- Investment = price × (1 + purchase costs %)
- Net rentₜ = first-year rent × (1 + escalation)ᵗ⁻¹ × (1 − expenses & vacancy %)
- Sale value = price × (1 + growth)ⁿ
The IRR is found numerically; it is the discount rate at which all cash flows net to zero.
Worked example
These are the sample values already filled in the calculator above, and the result it returns for them:
| Input | Sample value |
|---|---|
| Purchase Price (₹) | 2,50,00,000 |
| Stamp Duty & Purchase Costs (%) | 7 |
| First-Year Rent (₹) | 20,00,000 |
| Rent Escalation (% per year) | 5 |
| Expenses & Vacancy (% of rent) | 12 |
| Property Price Growth (% per year) | 4 |
| Holding Period (years) | 10 |
| Result | Value |
|---|---|
| Annual Return (IRR) | 10.33% |
| Net yield in year 1 | 6.58% |
| Total net rent received | ₹2,21,37,091 |
| Estimated sale value at exit | ₹3,70,06,107 |
| Total profit | ₹3,23,93,198 |
Tips for using the Commercial ROI Calculator
- Check the lease: escalation of 15% every 3 years is about 4.8% a year, not 5%.
- A long lock-in with a strong tenant lowers risk and justifies a lower yield.
- GST at 18% applies on commercial rent above the registration threshold; it is collected from the tenant.