Investment in Sarjapur - ORR real estate is good option or not?

Sarjapur-ORR(Outer Ring Road) place is a hot place for real estate. No doubt about it.

But decision whether somebody (NRI or a residing one)should invest there or not should be taken only after you do your homework based on your requirements.

NRIs generally go for reputed builders which eliminates the possibility of poor construction to a decent extent. Now a 3BHK(1600-2000 SFT) in the Sarjapur-ORR area

from a class A builder(Sobha/Poorva to a name a few) will cost you between 80 lacs to 1.2 Cr. These costs are generally for lower floors(ground to 3^rd/4^th). In-case you want to go for higher floors then floor rise charges (Rs.20-30 per SFT ) will apply thereby putting hole of another few lacs in your pocket. So in any case a smaller 3BHK won't come less than 85 lacs in higher floors.

Now let's see the appreciation which has happened in this area post 2002-2004 recession.  A similar flat from the same builder and in the same Sarjapur-ORR area would have costed you not more than 40-50 lacs if you'ld have entered into the deal somewhere in 2004/5. That means this area has got almost 100% or even more appreciation in last 6 years. Rather I'ld say that prices have mostly increased at a phenomenal rate mostly in last 2-3 years.

Going further I won't say that there won't be any appreciation but definitely it won't appreciate the way it has appreciated in last couple of years.

Bangalore is moving towards a developed metropolitan city but in phases. Just to make you understand better if somebody asks you "will you invest in area like Koramangala or Indiranagar"  then until and unless you are real rich with crores of rupee in your bank your probable answer would be "NO" for the fact that these areas have already appreciated a lot and scope of getting potential buyer at such higher prices will be very futile. Same thing is happening in Sarjapur-ORR area which has seen so much of appreciation in last 5 years that future appreciation rate is questionable.

People say that investing in this area will fetch you immediate rent… agreed but when they say it will also fetch good returns then here is my answer to them…let's do some basic mathematics.

Current 3BHK rents in this area is between 20-30k. Lets pick 30k and you rented your property for 5 years.  Also consider 5% rental increase every year.

So considering 5% rental increase every year, at the end of 5th year you'ld have made 20lacs as rent. What will be your flat value after 5 years? Or shall I ask whether people will be ready to buy your flat at the current market price? Since you purchased it at much appreciated rate together with the fact that your flat is 5 years old,  you won't be able to sell your flat at market appreciated prices. At any time people will prefer a brand new apartment/flat if they need to pay the market price.

In that case a simple Fixed deposit (8-9%) would have given you more return.
But the thing I'd like to insist is not on doing FD but instead of investing on a area which is already much appreciated, one should invest in an upcoming area where the scope of appreciation is more.

In-case of NRIs if they don't want to come back immediately then investing in an area which is already developed & appreciated won't fetch good returns in 3-5 years time.

Rather they should invest in upcoming areas like Chandaputra-Anekal belt or East Bangalore which is attracting lots of buyer's attention due to its location proximity to various IT parks and the kind of money pumping-in for infrastructure development like roads, flyovers, hospitals, shopping complexes, schools. And the cost at these upcoming places are still low(to get a glimpse of current rate in east Bangalore goto this link) that it is bound to get doubled or even more in few years down the line when places like these will be developed.

East Bangalore (belt between KR puram and hoskote) is getting sound infrastructure development with every passing time. Probably it's the only place in entire Bangalore from where you can reach to most number of IT parks/companies in 7-20kms range. Have a look at this this link to understand why there is so much of potential in this belt.

One more issue with Sarjapur-ORR is that it has major water problem and all the apartments in this area is depending on external water supply(water tanker's people having party every night). Water may be cheap at this point of time but in future water will the one parameter contributing to higher maintenance charges.

But upcoming areas will definitely won't have water problem at-least in near future. I know one such project(Pruksa Silvana follow the link to know more) in East Bangalore which is having their own water borowell and it is not one, or two but they have four in number.

It'ld be unfair to say that scope of development in Sarjapur - Outer Ring Road is going to be less. Given the proximity to so much of IT parks this area would always be a hot real estate development center. Rentals in Sarjapur - ORR is in demand and will continue to be in demand. But getting a good appreciation is questionable.

It is ground reality that when an area gets fully developed and becomes unaffordable then neighbouring/surrounding area starts getting focus. The same thing happened to Delhi and then NCR(National capital region) areas like (NOIDA, Gurgaon, etc.) came into picture. NOIDA got developed and now greater NOIDA is coming where prices are very much affordable.  On a same note, Bangalore surrounding areas like Anekal-Chandapura, East Bangalore, Hosur, Bidadi are coming up and for sure it's good appreciation real estate candidate in near future. To know about Bangalore upcoming areas read this.

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• Pruksa silvana: FDI real estate villa/Row houses project in East Bangalore
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• Bangalore upcoming areas/suburbs to see real estate appreciation and development
• Points/Factors/Criteria to be considered before purchasing/investing in the real estate property
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