Real Estate, Yet The Best For Investment

Real estate continues to be one of the most vibrant and profitable avenues to invest in the country. In almost all the markets, prices of residential real estate have appreciated in the last one year and real estate continues to be one of the most vibrant and profitable avenues to invest. Anuj Puri, the chairman and country head of global consultancy firm Jones Lang LaSalle India, says that investment in residential projects is currently the preferred route for investors, since the demand for homes in the metros and Tier II cities is virtually limitless. Commercial and retail spaces also present potentially lucrative investment propositions, especially in the larger cities, he says. 

Belying the general perception of slowdown in the sector and economy, realty consultancy firm DTZ in a report says that India has seen a commercial investment transaction swell by over 600% in the fourth quarter (October-December 2011), as against the third quarter. 

In almost all the markets, prices of residential real estate have appreciated in the last one year. Industry experts feel that the demand for residential units is likely to continue in the future as well. However, the investors should focus on buying houses close to a work place where the rental income will be high. This will also reduce the repayment burden. 

Anuj Puri says: “In residential realty, the focus should be on properties that have potential for assured rental yields and capital appreciation. This includes residential projects close to workplace catchments, industrial hubs and locations with high aspirational value. Tier I cities like Mumbai and Delhi, and Tier II cities like Bangalore, Pune and Chennai are seeing the highest demand from investors.” In broad terms, Puri says that the configurations in greatest demand are 1- and 2BHK flats in the central areas, as well as the suburbs, while 3BHK flats in good township-projects on the outskirts are also a good option. 

Pankaj Bajaj, the president of CREDAI NCR, says one cannot predict shortterm fluctuations in property prices, just as it is difficult to predict exchange rates or interest rates. But if the investor’s horizon is more than, say three years, Bajaj says it is a great time to invest in property. Many Tier I & II cities are seeing infrastructure creation and upgradation on the outskirts. 

“One can choose one’s preferred location based on job opportunities, local ambience and availability of infrastructure. Thereafter, it is a question of choosing the right developer and the right product. With the slowdown in real estate and high interest rates, if you can put money on the table you can strike bargain deals with trustworthy developers. But towards the end of the year, when the liquidity crunch is likely to ease, we will see a sharp rebound in prices and the bargaining power of developers,” Bajaj says. 

Anuj Puri says that in the commercial real estate sector, investors need to take informed decisions on projects under construction, regardless of the location and the developer. The same negative financial dynamics that are compromising completion dates of many office buildings hold true for residential projects, as well. If an investor decides to avail of the lower rates of residential projects under construction, he should ensure that at least 50% of the available units in the project are already sold and that construction has progressed according to schedule and is at least at the 50% mark. If half of the projects are already sold, it is more likely that the builders will complete the project. 

At the same time, it is advisable to buy from reputed builders, who will not delay projects as it will affect their reputation. In this regard, buy an apartment from a developer who owns a large chunk of land and the present project that he has launched is a small portion of the whole land piece. As he will launch the next phase of project soon, he will not like to delay the first phase as it will bring him a bad name. 

Tanuj Goel, the executive director of KDP Infrastructure, says: “This is a great time to buy homes, as the economy is recovering from a small slump. Property prices will be stable for at least a year, which might then shoot up. Also, government agencies have taken steps like reduction in CRR to infuse liquidity in the system and ensure that buyers have to pay less interest on home loans.” Besides, he says, as demand remains low, potential buyers can negotiate better deals and rates with developers. To clinch the best deal, now is the time to invest in property, he says. 

O P Agarwal, the chairman of Lotus Infra Projects Pvt Ltd, says that land is a scarce commodity, and as such, land prices are bound to appreciate. “I feel any time is right to invest in the reality sector. The sentiment being low, the prices have not appreciated as expected rather these are stagnant,” he said. “We, therefore, consider that this is the right time to invest in the reality sector. Investment in reality sector will give better returns than on any other assets,” he says.

Source -  TOI - 11 Feb 2012