Q:
A building costing Rs.700000.00 has been constructed on a freehold land measuring 100 sq m recently in a big city. Prevailing rate of land in the neighbourhood is Rs.150.00 per sq m. Determine the net rent of the property, if the expenditure on an outgoing including sinking fund is Rs.24000.00 per annum. Work out also the gross rent of the property per month.
Answer & Explanation
Answer: D) 48000/-, 6000/-
Explanation: Cost of construction = Rs.700000.00
Cost of land @Rs.150.00 per sq m = 100*150 = Rs.150000.00
Net return:
On building @ 6% on the cost of construction = 700000.00 *6/100 = Rs.42000.00
On the land @ 4% on the cost of land = 700000.00 *6/100 = Rs.6000.00
Total net rent per year = Rs.48000.00
Gross rent = Net rent + outgoings = 48000+24000.00 = 72000.00 per annum
Gross rent per month = 72000/12 = 6000.00.
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