What is the 70% Rule in Investing? Your Simple Guide for India

Apr, 22 2025

If you've ever looked into real estate investing, you've probably heard of the 70% rule. Some swear by it, others say it's just a shortcut. The gist? It’s a quick way to figure out how much you should pay for a property if you want to profit—especially if you’re planning to fix and sell.

In India, where the real estate scene flips faster than your favorite dosa, having a rule of thumb makes decisions easier. The idea is simple: never pay more than 70% of the property’s expected after-repair value (that’s what you think it’ll sell for) minus what you’ll spend on repairs. So, if the home should fetch ₹1 crore after fixing it up, and you'll need ₹10 lakh for repairs, your max offer should be ₹60 lakh. Anything higher, and you’re eating into your profits or risking a loss.

This trick comes straight from experienced investors. They use it to avoid overpaying and to shield themselves from hidden costs. With rising construction prices and shifting local rules in India, sticking to such a rule can keep your nerves (and wallet) safe. Sounds good, right? But there’s a catch—sometimes markets move faster or slower, repairs cost more, or selling takes longer than you think. That’s why you need more than a simple formula. Let’s walk through how this rule actually works here and how to tweak it for yourself.

• Understanding the 70% Rule
• How the 70% Rule Works in the Indian Market
• Common Mistakes and Smart Tips
• Is the 70% Rule Right for You?

Understanding the 70% Rule

The 70% rule is a quick math trick investors use, especially when flipping houses or looking at new investment plans in India. The main idea is pretty straightforward. You figure out the maximum price you should pay for a property by taking 70% of what you think the fixed-up place could sell for and then subtracting the cost of repairs. That way, you aren’t left with too little profit or—worse—unexpected losses.

Here's how the rule looks as a formula:

Maximum Offer Price = 70% of After Repair Value (ARV) − Estimated Repair Costs

Let’s put it into action. Say a flat in Pune could sell for ₹80 lakh after you renovate it. If the upgrades will cost you ₹10 lakh, then you do the math: 70% of ₹80 lakh is ₹56 lakh. Take off ₹10 lakh for repairs, and ₹46 lakh is what you should ideally offer. If the seller is asking way more, it’s time to walk away or negotiate harder.

The ‘70%’ part isn’t random. It covers things like agent fees, loan interest, closing costs, and your profit. A lot of investors in the US swear by this rule, and now, quite a few in India are starting to use it, too, even for real estate investing.

Here’s why the 70 percent rule has caught on:

• Speed: No need for spreadsheets or complicated math. You get a ballpark figure fast, which helps when the market is hot.
• Protection: Helps you avoid overpaying, especially if you worry about unexpected costs eating up your returns.
• Clarity: You can explain your offer honestly to a seller, showing you’re not just low-balling for no reason.

But remember, the rule isn’t perfect for every case. If you’re buying homes to rent out, or if the market is slow, you might want to adjust that 70% number. And in cities where home prices are sky-high, like Mumbai or Bengaluru, even 70% might mean you’re priced out.

How the 70% Rule Works in the Indian Market

The 70 percent rule wasn’t born in India, but it fits our property scene surprisingly well. Indian cities move fast, and negotiation is a big part of every deal, from Delhi to Bengaluru. Still, blindly applying the 70% rule without checking the math could backfire. Here’s how it really works for people using investment plans in India—especially if you’re looking at flipping or renting out real estate.

First, figure out the fair market value of the place—not today, but after you’ve done all the upgrades. Agents call this the after-repair value or ARV. In Mumbai, for example, that might mean looking at similar recently renovated flats in the same block or neighborhood. Don’t just guess. Use property sites, talk to brokers, and dig up real sales figures.

Next, get a realistic estimate of how much fixing or sprucing up the property will cost. Labor and material prices in India keep rising, sometimes without warning. If a bathroom reno in Pune ran ₹3 lakh last year, plan on it hitting ₹4 lakh this year—don’t low-ball yourself. Consider everything: electrical work, plumbing, even government permissions and stamp duty if needed.

Here’s the quick math, using the 70 percent rule:

• ARV (After-repair value) = ₹80,00,000
• Estimated repair costs = ₹10,00,000
• 70% of ARV = ₹56,00,000
• Max price to pay = ₹56,00,000 - ₹10,00,000 = ₹46,00,000

This gives you breathing room for things like delays, surprise expenses, or an unexpected market dip. Investors following investment plans in India love this approach when hunting for distressed properties, homes needing total makeovers, or houses up for auction. Some sharp buyers have used this trick to double their money, but the key is sticking to the numbers—not getting caught up in a bidding war or fancy features.

If you want to see how fast costs jump, check out this quick snapshot for 2024:

City	Avg. Repair Cost (per sq. ft.)	Stamp Duty (%)
Delhi NCR	₹1,800	6-7%
Mumbai	₹2,500	6%
Bengaluru	₹1,600	5-6%

Always pad your repair budget and check stamp duty rates—they eat a chunk of your profit if you miss them in the calculations. The 70 percent rule makes quick screening easier, but double-check every bit of data before you pull the trigger.

Common Mistakes and Smart Tips

Even experienced investors can mess up when using the 70 percent rule. One of the big mistakes? Not counting all the repair costs. It’s easy to think fixing up a flat will be cheap. But when you forget stuff like plumbing, electrical rewiring, permits, and labor—which is getting more expensive in India these days—you end up with a smaller profit, or no profit at all.

Another common goof is getting too optimistic about the after-repair value. People assume because a similar flat sold for ₹1 crore, theirs will too. Markets can dip, buyers might ask for a discount, or that final sale could take months. If you overestimate this number, the 70% rule can push you to pay more than you should.

Don’t ignore legal costs and taxes. Indian property deals are loaded with paperwork, stamp duty, and GST. These can suck up a surprising chunk of your budget. Here’s a quick breakdown to help spot overlooked costs:

Expense	Typical Range (%)
Repair/renovation	10-25%
Legal/stamp duty & registration	6-9%
Agent/Broker fees	1-2%
Taxes/GST (on under-construction)	5-12%

So, what are some smart tips? Always get a second opinion on repair costs—call in a contractor or use detailed checklists. For the after-repair value, look at at least five recent sales in the same building or neighborhood rather than just one.

• Double-check all hidden costs, including loan processing fees if you’re using a housing loan.
• Don’t rush—if you’re not getting at least a 15-20% expected margin after all possible costs, walk away. A good deal is better than a fast one.
• If you’re new, try the 70% rule on paper a few times before diving in. Practice on listings in your target city and see what numbers come up.

Remember, the Indian real estate market can shift fast—prices in Pune or Gurugram this year might not match next year. Stay flexible, update your local info regularly, and don’t be afraid to renegotiate or skip deals that don’t work for you.

Is the 70% Rule Right for You?

So, should you jump in and follow the 70 percent rule? It's not a one-size-fits-all answer. For folks looking at investment plans in India, it really depends on your style, your goals, and how much risk you’re cool with.

This rule makes sense if you want a quick way to sort out good deals from bad ones. It’s a safety net—useful when you’re new or if you don’t trust your gut yet. A 2023 survey from ANAROCK Property Consultants showed that 60% of Indian property investors used some kind of quick formula like the 70 percent rule to make initial offers. That tells you it’s not just theory—people are actually using this in the real world.

But things get tricky in hot markets like Mumbai or Bangalore. Sometimes sellers won’t budge and deals go above that 70% mark. Also, the rule assumes you can predict repair costs and future values, which isn’t always easy. If you’re more experienced and can crunch complex numbers, you might outsmart the rule and still make good money.

“The 70% rule is a great starting point, but in India’s diverse market, knowing your turf is even more important. Use it as a filter, not a final answer.”
— Amit Goenka, managing director, Nisus Finance

Here’s when the 70% rule makes sense for you:

• You’re just starting out and need a clear, simple guide to avoid rookie mistakes.
• You want to keep profit margins thick—think house flipping or quick turnarounds.
• You don't have the time or tools to do deep financial analysis for every property.

Not so great if:

• You’re in a market with sky-high competition, where sellers get top rupee no matter what.
• Your main goal is holding rentals long-term rather than flipping.
• You’ve got unique knowledge (like upcoming metro expansion or tax breaks) that could bump values above normal.

Situation	How Useful Is the 70% Rule?
First-time investor	Very useful
Experienced, data-driven investor	Somewhat useful
Hot metro city market	Often too strict
Slower, low-competition market	Works well

At the end of the day, the 70 percent rule is just a tool. Get to know your local market, double-check repair costs, and never be afraid to walk away from a deal. Your money works way harder with a smart plan.