Micro Economics : Bangalore Land price in 2000 and Bangalore Land price in 2005

We all heard, Mr:X braught a 20X30 site 6 years ago in a cheap rate at 20 Lakh in Jayanagar and now the price has doubled! ie : at 40 Lakhs.People say he made 20 Lakh Profit!!!Is that so ?

Let's have some real analysis.

We know due to inflation/deflation,draught,terrorism,whatever the ruppe value fluctuates.
CPI (consumer price index) is a term used to capture the change in the cost of a fixed basket of products and services, including housing, electricity, food, and transportation. Here in 2000->2005 CPI rose from 371 to 456.(Due to inflation,political unstability,world economy...)

I have collected the CPI of India for the years 2000-2006
In 2000 the CPI was 371 for a Salaried person (considering the Base year as 1984 @ 100)
Lets see the value of 40Lakh in 2006 in 2000 Rs terms
ie : The nominal value of 40 Lakh in 2006 can be corrected as a real price in '2000 Rs' terms
Real value of 40 Lakh in 2006
= Nominal value of 2006* (CPI 2000/CPI 2006)
= 40 L * (371/456)
= 40L * .82
= 32.5 Lakhs

When we say a profit of 20 Lakhs( 40 -20) ,the real fact is Profit is reduced by 7.5 Lakhs to 12.5 Lakhs (32.5-20) ! Appadi?

Let me end this with a wise quote :

"Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.” - by Sam Ewing