In March 2025, certified financial planner D. Muthukrishnan posted something on X that made a lot of property investors uncomfortable.
A bungalow in Nepean Sea Road, South Mumbai — one of the most expensive streets in the world — was bought for around ₹1 lakh in 1917. It's now being sold for ₹400 crore.
40,000 times your money. In a single property.
Sounds like the greatest investment in Indian history, right?
Muthukrishnan did one simple thing. He put it in a CAGR calculator.
40,000x over ~108 years = 11.3% CAGR.
That's it. 11.3% per year. The stock market has done 15-17% CAGR over similar long periods.
His point was sharp:
"Real estate is always discussed in multiples. Rarely anyone in that industry calculates XIRR or annualised returns."
He's absolutely right. But here's the thing — even Muthukrishnan didn't tell the full story. Because he only calculated the price appreciation. He completely ignored the rental income this bungalow would have generated over 108 years.
And that changes the picture significantly.
The Number Everyone Talks About: CAGR
CAGR stands for Compound Annual Growth Rate. It answers one simple question:
If my money grew smoothly from Point A to Point B over X years, what would the annual growth rate be?
For the Nepean Sea Road bungalow — starting value ₹1 lakh in 1917, ending value ₹400 crore in 2025, over ~108 years — the CAGR is ~11.3%.
For a more relatable example Muthukrishnan gave — someone who bought a property 25 years ago that went up 10x — the CAGR is just 9.6%.
Sounds reasonable. But CAGR has a fundamental problem — it only cares about the starting price and ending price. Nothing in between matters to it.
It doesn't ask: Did you take a home loan? What EMI did you pay? What was the interest rate? Did you pay stamp duty? What was the maintenance cost? Did you earn any rent? Did you prepay the loan?
CAGR is that friend who asks "kitne mein liya, kitne mein becha?" and thinks that's the whole story.
CAGR Ignores
XIRR Captures
The Number That Actually Matters: XIRR
XIRR — Extended Internal Rate of Return — is the honest metric.
It takes every single rupee that went out of your pocket, every rupee that came back in, and the exact date each transaction happened. Then it calculates your true annualized return.
Let's go back to that Nepean Sea Road bungalow and add what Muthukrishnan skipped — the rent.
A prime bungalow in South Mumbai would have generated rental income throughout its life. Even being conservative — the owner would have earned 3-4% of the property's market value as annual rent. Mumbai's average residential yield sits at 2-4% today (Anarock Q1 2024 data), and was likely higher in earlier decades when the price-to-rent ratio was lower.
Over 108 years, that rental income is real money that came back to the owner. On a ₹400 crore asset, even the last decade's rent alone would run into crores.
When you factor in rental cash flows across the entire holding period, the XIRR of this investment doesn't stay at 11.3%. It moves higher — likely into the 13-15% range, depending on assumptions about rent growth and vacancy.
Now Let's Bring This Home — Your Property, Your Numbers
A Nepean Sea Road bungalow is great dinner party talk. But let's get to what actually matters to you — a 2BHK or 3BHK that a salaried family buys with a home loan.
A family buys a 2BHK in Pune for ₹50 lakhs in 2015. They sell it in 2025.
Pune saw roughly 10% annual appreciation in recent years (Colliers Q1 2024 data). With a flatter 2015-2019 period and a sharp post-COVID rise, a reasonable 2025 value: ₹90 lakhs.
That 6.05% is the number most people would quote at a family gathering. Now let's open up the actual wallet.
Money Going OUT
Home loan: ₹40 lakh. Interest rate started at ~9.7% (SBI base rate, 2015). Dropped to 6.7-7% by 2021 during aggressive RBI cuts. Climbed back to ~8.5% by 2023. Effective average: roughly 8.5%.
But here's what actually happens in Indian households. Nobody pays EMI for 20 years straight. Salary hikes, annual bonuses, a small inheritance — most Indian borrowers prepay aggressively. Industry data shows 25-40% interest savings through prepayment, with many borrowers closing loans in 8-12 years.
This family closes the loan in 9 years through regular EMI (~₹34,500/month) plus annual prepayments of ₹1-1.5 lakh from bonuses.
Money Coming IN
Pune's rental yield averages 3.5-4.5% (Anarock Q1 2024, Magicbricks Q1 2025 data). Starting rent: ~₹14,000/month in 2015. Rental inflation ran 5-7% pre-pandemic, jumping to 7-9% post-pandemic (NoBroker H1 2025).
Realistic trajectory — ₹14,000/month in 2015, rising to ₹24,000/month by 2025 through annual renegotiations. Average over 10 years: ~₹18,000/month.
The Verdict
Rental income creates regular cash inflows that CAGR completely ignores. In cities like Pune and Bangalore where yields run 3.5-4.5%, this adds meaningfully to your total return.
Leverage amplifies your return on capital. You put ₹14L of your own money on Day 1 to control a ₹50L asset. If that asset goes up 80%, your ₹14L didn't earn 80% — it earned much more on a percentage basis.
Now flip the scenario. Buy a ₹2 crore flat in Mumbai. Leave it empty because you're an NRI "investor." Mumbai's yield is 3.6-4.15%, and you're earning zero of it. Premium maintenance — ₹5-8/sq ft. Stamp duty ate ₹12 lakh on Day 1.
That XIRR? Could drop to 3-5%. Maybe worse.
Same asset class. Same city. Wildly different actual returns. Only XIRR tells you which story you're living.
What Happened with Amitabh Bachchan's Flats
This isn't hypothetical. In October 2025, Amitabh Bachchan sold two luxury apartments on the 47th floor of Oberoi Exquisite, Goregaon East, Mumbai for ₹12 crore. He'd bought them in 2012 for ₹8.12 crore. Registration data confirmed by CRE Matrix.
The headlines said 47% profit.
CAGR: ₹8.12 crore → ₹12 crore in 13 years = ~3%
CA Nitin Kaushik posted on X: "That's roughly 3% CAGR in one of India's most expensive real estate markets. That's not investing. That's inflation losing its patience."
He was right about the CAGR. But even he didn't run the XIRR — which would factor in stamp duty paid in 2012 (~₹40L), 13 years of premium maintenance (~₹15-20K/month), property tax, and crucially, whether these flats earned any rent.
If Bachchan earned rent at Mumbai's 3.6-4% yield, the XIRR picture improves. If the flats sat empty — as many celebrity and NRI investments do — the XIRR drops even below 3%.
Bachchan can afford a 3% return on ₹8 crore. The question is — can you?
The Real Lesson from Muthukrishnan's Tweet
His core message was right: multiples are misleading. 40,000x sounds extraordinary. 11.3% per year sounds normal. Same investment.
He also shared a useful framework — Fixed deposits do Inflation + 1%. Gold does Inflation + 1.5%. Real estate does Inflation + 3%. Equity does Inflation + 6%.
But even this framework uses CAGR thinking — price appreciation only. When you add rental income through XIRR, real estate can outperform "Inflation + 3%" — especially in high-yield cities like Bangalore (4.45% yield), Pune (3.5-4.5%), or Kolkata (3.7-4%).
And when you factor in costs that CAGR ignores — stamp duty, loan interest, maintenance, property tax — some investments that look solid at 8-9% CAGR might actually be delivering 5-6% XIRR.
The truth is always messier than any framework. Which is exactly why XIRR exists.
When to Use Which
Use CAGR when you want a quick sense of how property prices have moved across cities or time periods. It's a headline metric. Good for research. "Bangalore did 19% CAGR last year, Goregaon did 3%." Quick, clean, directional.
Use XIRR when you're making an actual buy, hold, or sell decision. When real money leaves your account every month and real rent comes in — XIRR is the only number that respects the full timeline of your investment.
CAGR is the trailer. Makes everything look exciting. XIRR is watching the full movie. Sometimes it's better than the trailer promised. Sometimes it's worse. Either way — you know the truth.
Before Your Next Property Decision
Run the XIRR. List every outflow with its date. Every EMI. Every prepayment. Every maintenance payment. Every property tax. Every rent received. The final sale amount.
Then look at the number.
No feelings. No dinner table stories. No "40,000 times bhai."
Just the actual return on your money.