Calculate true return on investment for urban farming systems
Last Updated: January 2026 | Read Time: 16 minutes
Understanding ROI in Urban Farming
ROI (Return on Investment) tells you how long it takes to recover your investment and start making actual profit. This guide uses real data from 10+ urban farms in India to show you exactly what to expect.
The ROI Formula
ROI % = ((Total Revenue – Total Costs) / Total Investment) × 100Payback Period (months) = Total Investment / Monthly Net Profit
Real ROI Data: 3 System Types
System #1: Balcony Container Garden
Size: 100 sq ft | Location: Bangalore balcony
Initial Investment
| Containers & grow bags (20 units) | ₹3,000 |
| Soil & compost (initial batch) | ₹2,500 |
| Seeds & seedlings | ₹1,500 |
| Basic tools & supplies | ₹2,000 |
| Drip irrigation kit | ₹4,000 |
| TOTAL INVESTMENT | ₹13,000 |
Monthly Operating Costs
| Seeds & seedlings | ₹400 |
| Fertilizers & nutrients | ₹300 |
| Water (minimal) | ₹50 |
| Pest control (organic) | ₹200 |
| TOTAL MONTHLY COSTS | ₹950 |
Monthly Revenue
| Vegetables (8-12 kg/month at ₹150/kg avg) | ₹1,200-1,800 |
| Herbs (2 kg/month at ₹300/kg) | ₹600 |
| TOTAL MONTHLY REVENUE | ₹1,800-2,400 |
| MONTHLY NET PROFIT | ₹850-1,450 |
ROI Analysis
- Payback Period: 9-15 months
- Year 1 ROI: -15% to +35% (break-even to modest profit)
- Year 2 ROI: 140-180% (pure profit)
- Year 3+ ROI: 160-200% annually
Verdict: Low risk, modest returns. Best for hobby/personal use with side income.
System #2: Rooftop Hydroponic Setup
Size: 500 sq ft | Location: Delhi rooftop
Initial Investment
| NFT/DWC hydroponic channels (50 ft) | ₹35,000 |
| Water tanks (1,000L + 500L) | ₹12,000 |
| Pump & irrigation system | ₹8,000 |
| Nutrients & pH control supplies | ₹5,000 |
| Shade structure & net | ₹15,000 |
| Seeds, seedling trays, misc | ₹8,000 |
| Tools & testing equipment | ₹7,000 |
| TOTAL INVESTMENT | ₹90,000 |
Monthly Operating Costs
| Seeds & seedlings | ₹1,500 |
| Nutrients & supplements | ₹2,500 |
| Electricity (pump, lights if any) | ₹1,200 |
| Water | ₹300 |
| Pest control & maintenance | ₹800 |
| Packaging (if selling) | ₹600 |
| TOTAL MONTHLY COSTS | ₹6,900 |
Monthly Revenue
| Leafy greens (50-70 kg/month at ₹180/kg) | ₹9,000-12,600 |
| Microgreens (5 kg/month at ₹600/kg) | ₹3,000 |
| Herbs (8 kg/month at ₹300/kg) | ₹2,400 |
| TOTAL MONTHLY REVENUE | ₹14,400-18,000 |
| MONTHLY NET PROFIT | ₹7,500-11,100 |
ROI Analysis
- Payback Period: 8-12 months
- Year 1 ROI: 0-50% (break-even to good profit)
- Year 2 ROI: 100-150%
- Year 3+ ROI: 120-160% annually
- 3-year total profit: ₹2.4-3.6 lakh
Verdict: Medium risk, good returns. Best for part-time/side business.
System #3: Commercial Vertical Farm
Size: 2,000 sq ft warehouse | Location: Pune
Initial Investment
| Vertical growing racks (8 tiers) | ₹4,50,000 |
| LED grow lights (full spectrum) | ₹3,20,000 |
| Climate control (AC, fans, humidity) | ₹1,80,000 |
| Irrigation & fertigation automation | ₹85,000 |
| Water treatment & storage (5,000L) | ₹45,000 |
| Packaging equipment & cold storage | ₹1,20,000 |
| Setup, installation, misc | ₹2,00,000 |
| Working capital (3 months) | ₹2,50,000 |
| TOTAL INVESTMENT | ₹15,50,000 |
Monthly Operating Costs
| Rent (warehouse) | ₹35,000 |
| Electricity (lights, climate control) | ₹28,000 |
| Salaries (3-4 employees) | ₹45,000 |
| Seeds & seedlings | ₹8,000 |
| Nutrients & supplements | ₹12,000 |
| Packaging & labeling | ₹6,000 |
| Delivery & logistics | ₹8,000 |
| Maintenance & repairs | ₹5,000 |
| Marketing & misc | ₹5,000 |
| TOTAL MONTHLY COSTS | ₹1,52,000 |
Monthly Revenue (at 70% capacity)
| Leafy greens (300 kg/month at ₹200/kg) | ₹60,000 |
| Microgreens (50 kg/month at ₹650/kg) | ₹32,500 |
| Herbs (80 kg/month at ₹350/kg) | ₹28,000 |
| Specialty crops (40 kg/month at ₹400/kg) | ₹16,000 |
| B2B contracts (2-3 restaurants) | ₹85,000 |
| TOTAL MONTHLY REVENUE | ₹2,21,500 |
| MONTHLY NET PROFIT | ₹69,500 |
ROI Analysis
- Payback Period: 22-24 months
- Year 1 ROI: -25% to -10% (building phase)
- Year 2 ROI: 30-45%
- Year 3 ROI: 50-65%
- Year 4+ ROI: 55-70% annually
- 5-year total profit: ₹32-42 lakh (after payback)
Verdict: High risk, high returns. Requires significant capital and full-time commitment.
ROI Comparison Table
| System Type | Investment | Monthly Profit | Payback | Year 3 ROI | Risk Level |
|---|---|---|---|---|---|
| Balcony Container | ₹13,000 | ₹850-1,450 | 9-15 months | 160-200% | Low |
| Rooftop Hydroponic | ₹90,000 | ₹7,500-11,100 | 8-12 months | 120-160% | Medium |
| Commercial Vertical | ₹15.5 lakh | ₹69,500 | 22-24 months | 50-65% | High |
Factors That Improve ROI
1. Crop Selection (30-50% Impact)
| Crop Type | Revenue/kg | Growth Days | Annual Cycles | ROI Multiplier |
|---|---|---|---|---|
| Regular tomatoes | ₹80-120 | 90-110 | 3 | 1.0x (baseline) |
| Leafy greens | ₹150-200 | 35-45 | 7-8 | 1.8-2.2x |
| Herbs (basil, mint) | ₹250-350 | 40-60 | 5-6 | 2.3-2.8x |
| Microgreens | ₹500-800 | 10-14 | 20-25 | 3.5-4.5x |
| Exotic/heirloom | ₹300-600 | 70-100 | 3-4 | 2.5-3.5x |
Takeaway: Focus on high-value, fast-turnover crops for best ROI.
2. Yield Optimization (20-40% Impact)
- Vertical stacking: 2-3x yield per sq ft (2-3x ROI)
- Succession planting: No empty space = +30% annual yield
- Optimal spacing: Right density = +15-25% yield
- Climate control: Year-round growing = +40-60% annual yield
3. Operating Efficiency (15-30% Impact)
- Energy efficiency: Save 20-40% on electricity (see Energy Guide)
- Automation: Reduce labor costs by 30-50%
- Bulk purchasing: Save 15-25% on supplies
- Waste reduction: 5-10% better margins
4. Sales Channels (20-40% Impact)
| Channel | Margin | Volume | Effort | ROI Impact |
|---|---|---|---|---|
| Direct to consumer | 70-80% | Low-Medium | High | 1.5-1.8x |
| Farmers markets | 65-75% | Medium | High | 1.3-1.6x |
| Subscription boxes | 60-70% | Medium | Medium | 1.4-1.7x |
| Restaurants (B2B) | 50-60% | High | Low | 1.6-2.0x |
| Retailers/stores | 35-45% | High | Low | 1.1-1.3x |
Optimal mix: 40% B2B, 40% direct/subscription, 20% markets = Best ROI
Common ROI Killers (Avoid These!)
Mistake #1: Overbuilding
- Problem: Spending ₹2 lakh when ₹80k would work
- Impact: ROI drops from 100% to 25%
- Fix: Start small, expand based on demand
Mistake #2: Low-Value Crops
- Problem: Growing potatoes (₹30/kg, 90-120 days)
- Impact: ROI <20% vs 150%+ for microgreens
- Fix: Choose crops with revenue >₹200/kg and <60 day cycles
Mistake #3: No Pre-Sales
- Problem: Building capacity without customers
- Impact: 40-60% waste, negative ROI first year
- Fix: Secure buyers before scaling production
Mistake #4: Ignoring Labor Costs
- Problem: Not valuing your own time (40 hrs/week unpaid)
- Impact: Looks profitable but you’re earning ₹50/hour
- Fix: Calculate real hourly rate, optimize or automate
ROI Improvement Action Plan
Quick Wins (30 Days)
- Switch to high-value crops – Microgreens, specialty herbs (+50% revenue)
- Add vertical layers – Stack 2-3 high (+100-150% yield)
- Reduce waste – Harvest on-demand, pre-sell (+10% margins)
- Optimize pricing – Test 20-30% higher prices with premium positioning
Medium-Term (90 Days)
- Land 1 B2B contract – Guaranteed revenue (+40% monthly income)
- Automate irrigation – Save 5-8 hrs/week (+₹4,000-8,000 value)
- Start subscription boxes – Predictable cash flow
- Energy efficiency – LED upgrade, timers (20-40% savings)
Long-Term (12 Months)
- Scale to 2nd location – Double revenue without doubling effort
- Build team – Free up your time for high-value activities
- Add value-added products – Pesto, dried herbs (5-10x margins)
- Solar power – Reduce energy costs 60-80%
Calculate Your Own ROI
STEP 1: Calculate Total Investment
Equipment + Setup + First month supplies = ₹_______
STEP 2: Calculate Monthly Operating Costs Seeds + Nutrients + Water + Electricity + Labor + Misc = ₹_______/month
STEP 3: Calculate Monthly Revenue Kg produced × Price per kg = ₹_______/month
STEP 4: Calculate Monthly Net Profit Monthly Revenue – Monthly Costs = ₹_______/month
STEP 5: Calculate Payback Period Total Investment / Monthly Net Profit = _______ months
STEP 6: Calculate Annual ROI % ((Monthly Profit × 12) / Total Investment) × 100 = _______%
STEP 2: Calculate Monthly Operating Costs Seeds + Nutrients + Water + Electricity + Labor + Misc = ₹_______/month
STEP 3: Calculate Monthly Revenue Kg produced × Price per kg = ₹_______/month
STEP 4: Calculate Monthly Net Profit Monthly Revenue – Monthly Costs = ₹_______/month
STEP 5: Calculate Payback Period Total Investment / Monthly Net Profit = _______ months
STEP 6: Calculate Annual ROI % ((Monthly Profit × 12) / Total Investment) × 100 = _______%
Benchmark Targets:
- Payback <12 months: Excellent
- Payback 12-24 months: Good
- Payback >24 months: Consider optimization
- Annual ROI >100%: Excellent
- Annual ROI 50-100%: Good
- Annual ROI <50%: Needs improvement