Recently i read a message in WhatsApp as follows,
"In 1917, a bungalow on Nepean Sea Road, South Mumbai was bought for ₹1 lakh. That very same property is now reportedly selling for ₹400 crores. That’s a staggering 40,000 times return over a century"
Sounds jaw-dropping, doesn’t it?
But here’s a perspective check: when you translate this return into annualised terms, the number comes down to just 11.3% per annum.
Suddenly, it doesn’t sound all that glamorous, does it?
Why Annualised Returns Matter More Than Multiples
The real estate industry loves to talk in terms of how many times a property has multiplied. "I bought this for ₹10 lakhs, now it's worth ₹1 crore!” — a classic line. But rarely do we hear anyone mention what annualised return or XIRR that investment actually delivered.
For example, a 10x return in 25 years might sound phenomenal, but the XIRR works out to 9.6% per annum.
On the other hand, say you hear about an equity mutual fund or equity investment which has given a 26% annualised return over 20 years. Sounds solid, but perhaps not exciting to everyone.
But here’s a twist — that’s a 100x return over 20 years!
The Power of Perspective
Finance professionals and informed investors always speak in terms of annualised returns. Why? Because that’s the only consistent and comparable way to evaluate performance across asset classes, time periods, and risk profiles.
Let’s look at what some long-term average annualised returns look like:
Fixed Deposits: Inflation + 1%
Gold: Inflation + 1.5%
Real Estate: Inflation + 3%
Equity (Mutual Funds/Stocks): Inflation + 7%
If a prime South Mumbai property, one of the most coveted real estate assets in the country, has only managed 11.3% annualised over 100 years — it puts a lot into perspective.
Why You Should Measure Everything in XIRR
When you start evaluating all your investments — real estate, mutual funds, FDs, gold — in terms of annualised returns or XIRR, your investment decisions become rational, comparable, and grounded.
So before saying:
“My flat has multiplied 10 times in 25 years”Ask yourself:“What’s my XIRR on this investment?”
When you do that, a so-called “massive return” may actually be modest. And a disciplined SIP in equity mutual funds may look a lot better than initially perceived.
Resetting Expectations is the Key to Smart Investing
Bull runs in real estate (like 2004–09) or equities (like 2004–07) are exceptions, not the norm. Smart investors don’t build strategies around exceptions — they plan for realistic, inflation-beating returns over the long term.
So the next time someone throws an “X times return” at you, open Excel or your financial calculator and run the numbers.
You might be surprised at what you discover.
