If you borrow to finance your real estate purchase, inflation is good for you from a real estate investment viewpoint. The same loan you borrow is actually worth 4.2% less compared to a year ago due to inflation.
If you are a landlord of commercial properties then long term leases with fixed rent increases, e.g. 20 years NNN lease with 2% annual rent increase will not be in your favor. The 2% rent increase is less than the inflation so your rent is actually worth less next year.
2008 Inflation - Impact on Commercial Real Estate Investments
The budget proposal of 2007-2008 states that service tax will now be levied on the rent received from the leasing of commercial properties at 12.36%. The imposition of this tax is a step towards broadening the scope of service tax, and imposing extra taxes on real estate. The 12.36% service tax will entail extra operating expenses and squeezing margins, knocking out the retail sector in India.
