Is a PG Business Profitable in India? A Worked Example
All numbers below are an example to explain how PG profit works. Your rent, costs and occupancy will be different, so replace them with your own.
The honest answer is: it can be, and it often is, but it depends much more on occupancy and costs than on the rent you charge. Two PGs with the same rent can have very different results.
The example PG
Imagine a PG with 40 beds and an average rent of ₹8,000 per bed per month. At 100% occupancy, the income is ₹3,20,000.
| Monthly cost (example) | Amount |
|---|---|
| Building rent | ₹1,00,000 |
| Electricity and water | ₹30,000 |
| Staff (manager, cleaner, security) | ₹25,000 |
| Repairs and maintenance | ₹15,000 |
| Internet | ₹5,000 |
| Other (supplies, software, misc.) | ₹10,000 |
| Total | ₹1,85,000 |
Profit at different occupancy levels
| Occupancy | Beds filled | Monthly income | Costs | Monthly profit |
|---|---|---|---|---|
| 100% | 40 | ₹3,20,000 | ₹1,85,000 | ₹1,35,000 |
| 80% | 32 | ₹2,56,000 | ₹1,85,000 | ₹71,000 |
| 60% | 24 | ₹1,92,000 | ₹1,85,000 | ₹7,000 |
Going from 100% to 80% cut profit almost in half, even though costs were the same. At 60%, almost nothing is left. In a real PG some costs (electricity, food) fall a little when beds are empty, but most do not. That is why occupancy matters so much.
The break-even point
Break-even occupancy is monthly costs divided by income at full occupancy: ₹1,85,000 ÷ ₹3,20,000 = about 58%. Below roughly 23 filled beds, this PG loses money. Know your own break-even number, because it tells you how much room for error you have.
What actually moves profit
- Occupancy: filling and keeping beds. See how to fill vacant beds.
- Building rent: usually the biggest cost. Owning the building or a good lease changes everything.
- Rent per bed: small increases matter, but only if you stay full.
- Collection: unpaid or late rent is lost income. See how to collect PG rent on time.
- Cost control: electricity, repairs and staff add up. See expense tracking.
- Scale: a second building with the same systems usually earns more than the first.
Work out your own numbers
Try our free PG business profit calculator with your real rent, beds and costs. Then keep checking them every month. Many owners only look at the bank balance, which does not show where the money is going. A monthly profit and loss report, like the one in PG ZONE, does.
Frequently asked questions
How much profit can a PG make?
It depends mainly on occupancy and building cost. In our example 40-bed PG, profit ranged from about 1.35 lakh a month at full occupancy to almost nothing at 60%. Calculate yours with real numbers.
What occupancy do I need to break even?
Divide your monthly costs by your income at full occupancy. In the example, that is about 58%.
Is it better to own or rent the building?
Owning removes your biggest cost. If you rent, read the lease for lock-in and rent increases, and make sure you still profit when the PG is not full.
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