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What is Equity?

Equity in real estate refers to the difference between a property’s current market value and the outstanding amount still owed on it, such as a home loan or mortgage. It represents the portion of the property that the owner truly “owns” financially.

Formula for Calculating Equity

Equity = Current Market Value of Property – Outstanding Loan Amount

Example:

  • Property value: ₹80 lakh
  • Home loan balance: ₹50 lakh
  • Equity = ₹30 lakh

Types of Equity

  1. Positive Equity

    • Property value is higher than the loan balance
    • Common in stable or growing markets
    • Beneficial for resale or refinancing
  2. Negative Equity

    • Loan balance is higher than property value
    • Occurs when property prices fall
    • Risky for owners and lenders

Equity is a key concept in real estate that represents your true financial ownership in a property. It grows as you repay your loan and as property values increase.

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