Achievement in the field of decision-making depends on having a thorough awareness of the possible returns on investments. Return on Investment (ROI), a crucial indicator that highlights gains and losses and guides decisions that influence both professional and personal pathways, is at the center of this evaluation.
ROI is a financial ratio used to determine how profitable an investment is about its cost. It provides information on the return of an investment by quantifying net gain or loss. ROI is a straightforward but insightful metric that helps stakeholders evaluate various prospects on an equal footing. This helps with resource allocation and overall strategy in company operations, marketing projects, and personal financial matters.
ROI is a fundamental component of financial analysis because of its broad applicability, which serves as an indicator for making the best decisions.
In the discussion below, we’ll talk about the functionality and importance of ROI in different situations, emphasizing its function in negotiating the complicated circumstances of a constantly shifting environment.
What Is ROI, and How Is It Calculated?
The term ROI stands for “Return on Investment”. It is a financial indicator that assesses an investment’s functionality or profitability to its cost. Return on investment (ROI) measures an investment’s gain relative to its initial cost. A percentage is frequently used to express it.
The phrase “return on investment” is not limited to online communities inhabited just by financial industry professionals or the elite circles of our cities’ financial sector. The phrase has acquired multiple meanings over time that translate to “advantages” or “benefits” for the broader population. But when it comes to real estate investments, the term has particular significance. We go over what a house loan’s return on investment is and guide you through how to find out what your loan’s current ROI is.
Home Loan Highlights 2024
| Bank/Finance Company | R.O.I (Reducing Per Annum) | Processing Fees | Loan Amount | CIBIL Score | Min. & Max. Loan Amount |
| HDFC Bank Home Loans | 8.45% – 10% | 0.5% – 1% | 5.00 Lacs – No Limit | 650 | 5.00 Lacs – No Limit |
| Kotak Bank Home Loan | 8.75% – 10% | N/A | 20.00 Lacs – No Limit | 700 | 20.00 Lacs – No Limit |
| Bank of India Home Loan | 8.5% – 10.75% | 0.25% – Rs.10000 | 10.00 Lacs – No Limit | 675 | 10.00 Lacs – No Limit |
| Canara Bank Home Loan | 9.25% – 13.8% | N/A | 10.00 Lacs – No Limit | 675 | 10.00 Lacs – No Limit |
| Aavas Housing Home Loan | 9.9% – 18% | 1% – 1.5% | 25.00 Lacs – 5.00 cr | 650 | 25.00 Lacs – 5.00 cr |
| Bajaj Housing Finance Home Loan | 8.45% – 10% | 0.2% – 0.5% | 5.00 Lacs – 75.00 cr | 650 | 5.00 Lacs – 75.00 cr |
| PNB Housing Home Loan | 8.75% – 14% | 0.25% – Rs.10000 | 5.00 Lacs – 20.00 cr | 625 | 5.00 Lacs – 20.00 cr |
| Shri Ram Housing Finance Home Loan | 11.5% – 13% | 1% – 1.25% | 10.00 Lacs – 1.00 cr | 650 | 10.00 Lacs – 1.00 cr |
| We Rize Home Loan | 10% – 18% | 0.5% – 1% | 5.00 Lacs – 75.00 Lacs | 650 | 5.00 Lacs – 75.00 Lacs |
| Mahindra Finance Home Loan | 9% – 15% | 1% – 3% | 3.00 Lacs – 75.00 Lacs | 650 | 3.00 Lacs – 75.00 Lacs |
| Capri Global Bank Home Loan | 9.5% – 15% | 1.25% – 1.5% | 10.00 Lacs – 1.50 cr | 650 | 10.00 Lacs – 1.50 cr |
| Tata Capital Home Loan | 8.6% – 11% | 0.2% – 0.5% | 30.00 Lacs – 7.00 cr | 750 | 30.00 Lacs – 7.00 cr |
| Aditya Birla Home Loan | 8.9% – 11% | 0.5% – 1% | 25.00 Lacs – 25.00 cr | 675 | 25.00 Lacs – 25.00 cr |
| Piramal Finance Home Loan | 10.5% – 14% | 1% – 1.5% | 30.00 Lacs – 5.00 cr | 650 | 30.00 Lacs – 5.00 cr |
| Satin Housing Home Loan | 11% – 18% | 2.5% – 3% | 5.00 Lacs – 1.00 cr | 700 | 5.00 Lacs – 1.00 cr |
| Indiabulls Finance Home Loan | 9.4% – 10% | 0.5% – 1% | 20.00 Lacs – 5.00 cr | 675 | 20.00 Lacs – 5.00 cr |
| Federal Bank Home Loan | 8.5% – 10% | 0.5% – Rs.13000 | 50.00 Lacs – 20.00 cr | 675 | 50.00 Lacs – 20.00 cr |
| IDFC Bank Home Loan | 8.85% – 9.25% | 1% – 1.5% | 10.00 Lacs – 5.00 cr | 680 | 10.00 Lacs – 5.00 cr |
| ICICI Bank Home Loan | 8.6% – 10% | 0.25% – 0.5% | 50.00 Lacs – No Limit | 700 | 50.00 Lacs – No Limit |
| Axis Bank (Asha Home Loan) | 9.9% – 14% | 0.5% – 1% | 5.00 Lacs – 1.00 cr | 700 | 5.00 Lacs – 1.00 cr |
| Yes Bank Home Loan | 9.4% – 10.5% | 0.25% – 1% | 50.00 Lacs – 10.00 cr | 700 | 50.00 Lacs – 10.00 cr |
| Yes Bank Home Loan (Small Segment) | 9.9% – 11% | 1% – 1.25% | 5.00 Lacs – 1.00 cr | 680 | 5.00 Lacs – 1.00 cr |
| Standard Chartered Home Loan | 8.5% – 10% | 0.5% – 1% | 25.00 Lacs – 25.00 cr | 700 | 25.00 Lacs – 25.00 cr |
| Jana Small Finance Bank Home Loan | 10.5% – 13.5% | 1% – 1.5% | 5.00 Lacs – 3.00 cr | 650 | 5.00 Lacs – 3.00 cr |
| DCB Bank Home Loan | 9.75% – 14% | 0.5% – 1% | 30.00 Lacs – 3.00 cr | 650 | 30.00 Lacs – 3.00 cr |
| SBI Bank Home Loan | 8.5% – 10.4% | N/A | 10.00 Lacs – No Limit | 650 | 10.00 Lacs – No Limit |
| Bank of Maharashtra Home Loan | 8.5% – 9.65% | N/A | 10.00 Lacs – No Limit | 675 | 10.00 Lacs – No Limit |
| Indian Bank Home Loans | 8.5% – 10.4% | N/A | 10.00 Lacs – No Limit | 675 | 10.00 Lacs – No Limit |
| Union Bank of India Home Loan | 8.5% – 10.8% | N/A | 10.00 Lacs – No Limit | 675 | 10.00 Lacs – No Limit |
| Central Bank of India Home Loan | 8.5% – 10.4% | N/A | 10.00 Lacs – No Limit | 700 | 10.00 Lacs – No Limit |
| Bajaj Finserv Home Loan | 8.5% – 10% | 0.2% – 0.5% | 20.00 Lacs – 15.00 cr | 700 | 20.00 Lacs – 15.00 cr |
| L&T Finance Services Bank Home Loan | 8.5% – 9.5% | 0.25% – Rs.10000 | 30.00 Lacs – 3.00 cr | 650 | 30.00 Lacs – 3.00 cr |
| Vistaar Finance Home Loan | 13% – 21% | 2% – 2.5% | 5.00 Lacs – 50.00 Lacs | 650 | 5.00 L |
The ROI Formula is Below:
ROI is equal to (Net Profit / Investment Cost) * 100.
The amount of money left over after all costs and expenses are subtracted from the investment’s revenue is known as the net profit. It represents the real return on the investment.
The whole amount of money spent on the investment, including the initial capital outlay and any subsequent payments, is referred to as the “cost of investment.”
Example Explanation: To demonstrate the idea, let’s look at a scenario in which a person invests Rs. 100,000 in a business. This investment generates a profit of Rs. 20,000 after twelve months. To figure out the ROI:
(20,000 / 100,000) * 100 = 20% is the ROI.
In this instance, a 20% ROI means that there is a profit of Rs. 20 for every Rs. 100 invested. A higher return on investment (ROI) usually indicates a better investment, but it’s important to take the investment’s risk into account. A higher return on investment (ROI) does not always correlate with lower risk.
The Calculation of Annualized ROI
When evaluating compounded returns over years and taking profit reinvestment into account, the annualized return on investment (ROI) concept might be helpful. The following calculation can be used to get the annualized ROI:
(1 + ROI)^n – 1 = Annualized ROI
where “n” is the length of time the investment has been carried out.
For example, suppose you choose to hold the investment for five years and your return on investment is twenty per cent.
To calculate the ROI that is annualized:
Yearly ROI is equal to (1 + 0.2)^5 – 1 = 13.33%.
This indicates that you should expect a compounded return of roughly 13.33% over five years if you reinvest your income annually on average.
How is the ROI on a Home Loan Calculated?
Taking out a home loan to invest in real estate entails several financial factors. Finding the return on investment (ROI) for a given investment aids in determining how profitable your business will be. This is a thorough guide to figuring out the return on your house loan:
Step 1: Compile the Required Data.
To get started, gather the necessary information needed for the calculation:
- Your house loan’s principal, or the amount of money you borrowed,.
- The interest rate that is associated with your housing loan.
- The length of time you have to pay back your house loan, or its term.
- The approximate market value of the asset you’re buying.
Step 2: Determine How Much Interest You Will Pay in Total.
This formula can be used to calculate the total interest you will pay throughout the loan:
Principal Amount * Interest Rate * Term = Interest
Let’s assume you have a ₹10,000,00,000 housing loan that has a 7.2% interest rate for a period of ten years. The total amount of interest you have to pay is ₹7,20,000.
Step 3: Determine the Property’s Resale Value
The estimated price you expect to receive when selling the property in the future is its resale value. Even though it can be difficult to determine with precision, you can get an estimate by using online tools or consulting real estate experts.
Step 4: Determine the ROI of Your Home Loan
The following calculation can be used to determine your home loan ROI:
ROI is calculated as (Resale Value of Property – Home Loan Amount – Total Interest Paid) /Home Loan Amount.
Let’s take an example where you have a home loan of ₹10,000,000, you are thinking about selling the property for ₹15,00,000, and you have paid ₹7,20,000 in interest. Using the following values in the formula:
(15,000,000 – 10,000,000 – 7,20,000) / 10,000,000 = 0.72 is the ROI.)
Thus, your house loan ROI would be 72%.
Step 5: Check out Additional Factors
Although the computation above gives you a basic idea of your home loan ROI, there are more things to think about:
Property Expenses: Take into account insurance premiums, maintenance expenses, and property taxes when doing your estimates. Your overall ROI may be impacted by these costs.
Capital Gains: You should include capital gains in your ROI if the property’s worth increases and you sell it for a higher price than you paid for it.
Market Trends: Take into account the general trends in the real estate market, as they have an impact on both property prices and resale possibilities.
Factors to Keep in Mind When Estimating the Return on Investment on Housing Loans
Here are some pointers to help you better analyze the return on investment (ROI) on your house loan and draw conclusions. Continue reading.
Make Long-Term Investments
An investment in real estate requires careful consideration. As an investor, you have to think about things like the builder’s reputation and other impending infrastructure. You must keep in mind, though, that real estate investments are supposed to be made over an extended period.
Understand the advantages of Having a Home Loan
Your upfront expenses will be minuscule when you choose a paperless home loan with an all-inclusive interest rate. Of course, there are additional tax advantages to choosing a house loan. To learn more, see our blog post on all the different kinds of house loans.
Make a Risk Assessment
You may maximize your real estate investment by carrying out a risk assessment. Real estate investments are expensive and have limited liquidity, so you have to consider all the risks before investing.
Do a Thorough Calculation of Your Home Loan ROI
You may calculate your home loan return on investment (ROI) methodically if you adhere to the instructions provided in the previous sections of this guide. Recall that the ROI on your house loan that remains after deducting all costs associated with buying, maintaining, and selling it is your true ROI.
Bottom Line
For borrowers to evaluate both the viability and profitability of real estate investments, they must comprehend the ROI for house loans. Through precise ROI computation, borrowers can assess possible returns on investment and make accurate choices about financing for house loans. For an in-depth study of the return on investment (ROI) for your home loan, don’t forget to take into account all pertinent elements and, if necessary, seek professional guidance.
We hope that this post will help you figure out your home loan return on investment.