Concept of Present Value

The present value (PV) is the current worth of expected future rental income, discounted using an appropriate rate that reflects market risk and time value of money.

• PV helps determine the asset’s investment value based on projected cash flows
  
• It is essential for comparing income-generating assets and making purchase decisions

Estimation Example

Assume a developed industrial property generates ₹1.2 crore in net annual income for 10 years, and a discount rate of 8% is applied.

• Using standard PV formula or a discounted cash flow (DCF) model, the present value would be approximately ₹8 crore to ₹8.5 crore
  
• The actual figure may vary depending on lease escalations, vacancy assumptions, and residual value