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A building is newly constructed with cost of Rs. 1cr over a plot of land costing Rs. 70 lacs.

A building is newly constructed with cost of Rs. 1cr over a plot of land costing Rs. 70 lacs. Building consists of 20 flats of area $120m^2$ each workout monthly standard rent/ flat from the following data

  1. Expected net return from land & building = 7%
  2. Rate of interest on sinking fund = 9%
  3. Life of building = 60 years
  4. Salvage value = 10% of the cost of building
  5. Repairs & maintenance cost = 7% of building cost
  6. Taxes and other outgoings = 25 % of gross rent.
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Building,cost land cost Total $1,00,00,000 \\ 70,00,000 \\ 1,70,00,000 $
Net return $\frac{7}{100}\times17000000 \\ Total$ $1190000$
Sinking fund $I_c$ $=\dfrac{i}{(1+i)^n-1} \\ =\dfrac{0.09}{(1+0.09)^60-1} \\ I_c=5.14 \times 10^{-4} \\ \text{Sinking fund instalment} \\ =I_c \times (cost-scrap) \\ = 5.14 \times 10^{-4} \times (10000000-0.1 \times 10000000) \\ =4626$ -

$\text{Repair & maintenance cost}$ $= \dfrac{7}{100}×10000000 \\ = 700000$

$\text{Gross rent = Net rent + sinking fund + Annual maintenance + outgoings}$

$\hspace{1.5cm}x = 1190000 + 4626+ 700000+ 0.25 x$

Gross rent =2526168

$\text {Therefore Gross rent / month} = \dfrac{2526168}{12}=Rs.210514 \\ \text{Therefore Gross rent / month/flat} = \dfrac{210514}{20}=Rs.10526$

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