Lot of investors have questions like where to invest in real estate specially in metro cities. But before that one should look for some important criteria which will help them a lot to find a property suitable to individual's need and requirement.
Set your goals/requirements clear
When you have finally made your mind to buy a real estate property then this should be your starting point. Do some homework and try to identify what you expect from the property in coming future, what is the tenure of your investment, etc.
To start, one can think on the following lines:
· Outline your budget and how much you can stretch it?
· Are you buying property for investment or for living purpose or both?
- If it is purely investment then what is the time frame you are OK to wait? In this case upcoming areas should be your point of interest. Again how long you are willing to wait should be the filter to narrow down which upcoming area.
- If property purchase is only for living purpose then what is the construction time? If it's more then you lose rentals every month in-case you don't have plans to occupy and start living there immediately.
- Purchase is for living as well for investment? This is where you need to draw a line between a developed area(like Koramangala/Indiranagar) and an upcoming area(Chandapura-Anekal belt, Old Madras road between KR Puram and Hoskote, etc).
Investment in an upcoming area
Lots of indeed benefits are associated with upcoming area.
- Lesser and affordable cost: Though construction cost will be same but you can definitely save on land value which will be lesser with respect to main city areas.
- Design and planning will be better: Lessons learnt from the past mistake will be used for better planning of upcoming areas. Roads will be broader, good number of flyovers presence will improve the connectivity, better master layouts, etc.
- Government supporting push will be always there: Government will encourage newer Industries, hospitals, shopping malls in upcoming areas to improve the infrastructure and livability of the place.
- Builders will be more inclined: In main city areas their profit margin is already sinking as the cost of land is phenomenally high. However, upcoming areas have lesser land price which they will be aiming to take advantage of.
But before investing in an upcoming area one should do research if any other real estate development is happening in that area or not. If the one you are interested is the first or second one then you should be little careful before investing in that area as it may take a very long time(may be around 5-10 years depending on its potentials) before you reap off the profit. But if 4-5 projects are already happening from good builders (if not from class A builders) then it is obvious that area has got the needed thrust to take it to the further level. One such example is stretch of Old Madras Road between KR Puram and Hoskote where around 10 big projects have kicked off and couple of them are in good shape.
Investment in a property which lies in a very well developed area
Buying in a developed residential area always comes with one big advantage which you can always bank on is rental income (in-case you are not planning to stay immediately).
These days a 3BHK flat from a decent builder may fetch you the rent between 20k-25k depending on flat size and apartment locality. A villa of 3/4 bedroom in the same area can get you the rentals between 20k-40k. Some flat owners provide all the interiors, furniture and electrical appliances to increase the rental value of their flat. Such fully furnished flat can get them very good rental deals anywhere between 25k-30k for a 3BHK flat.
But the dark side of putting your money in a developed area is that you may not get much appreciation because generally properties in such areas from a good builder will be costly and over a period of last few years it's price would already have got much appreciation. It'ld be unfair to say that it won't appreciate but it may not appreciate the way it'ld have appreciated during last few years. Also one has to accept the fact that with time flat's value will not get you the deal as per the prevailing market standards. But yes, you will definitely get the rental based on market rates in such developed localities.
Whether to buy bigger flat or smaller flat?
Have you seen 3BHK flats of size 1800-2000 SFT in projects which are getting kicked-off these days. Yes you'ld have but question is how many. These days builder as well as buyers are preferring to go for smaller 3BHKs of size ranging between 1400 - 1600 SFT. In India where inflation is around 10% cost of construction (materials as well as labour charges) are getting dearer every year. 5 years back what used to be the cost of bigger 3BHK is now the cost of smaller 2BHK. Prices have almost doubled and even more in some areas. If you purchase a bigger 3BHK now then it'll be little difficult for you to sell it after 5 years because inflation will add extra feathers to its cost for which there may not be good number of potentials buyers. 1800 SFT 3BHK flat which now costs around 80-85 lacs will cost over 1Cr after few years. Question is will there be any potential taker of it? If yes how many?
So if you want to either sell it or rent it, it's always advisable to go for medium size 3BHKs (1400 SFT to 1600 SFT). At any given point of time you'ld be able to find either a good number of lessee or potential buyers of your property.
Consider inflation and land scarcity in future
Investing in a plot and buying a flat are two different things which will push property prices up but the driving force will be different in both the cases. A plot price appreciates for the fact of land scarcity and not because of inflation. Until you've a house constructed on a plot inflation never comes into picture as you have nothing in place like steel, bricks, cements, etc whose cost will increase due to inflation. But a flat price appreciates mostly because of inflation and to a lower side because of land scarcity as well.
If you have a independent house that too in a gated society then push will be from both inflation as well as land scarcity and put together it'll fetch you very decent return in coming time.
Cost of maintenance now and in near future
Though this is a small aspect but it's worth to consider this specially when you are living in a gated society. Maintenance costs are decided on various parameters like electricity backup, salaries of workers and security staffs, water expenditure, maintaining common amenities, etc. While most of it we may not control and are bound to increase with inflation but the thing we can look at is water availability. Most of the downtown areas (if you talk about Gurgaon or Bangalore) suffers from this problem and in order to feed their water need, gated societies banks on external water supply (water tankers). Water may be affordable now but going further this will get dearer and we need to shell out more from our pocket to meet water expenses. But there are few areas (specially upcoming and suburb areas) which don't suffer from water problem and they can have their own water borowells. So consider this maintenance aspect as well while searching for a property.
Technology used in the construction
Traditionally a house is constructed in India with bricks(walls) and RCC. It's not only time consuming but also lots of money goes towards hiring labors. But times are changing fast and house construction technology being used in developed countries are gradually getting adopted in India as well. Some of the advanced technologies are so fast that entire dublex/triplex house structure can be constructed in 2-3 weeks of time. Lots of labor costs are saved there and benefits are passed to buyers from builders. One such technology is Mivan where everthing(walls, roofs, slabs) are RCC. Salarpuria Geenage and Pruksa Silvana(click here to know more about this project) are two such projects who have deployed this Mivan technology for construction.To know more about this refer this link and search for "Technology used for construction". Other such technology is using precasted slabs.
Check out these well researched links if you are interested to Gurgaon or Mumbai real-estate.
Check out these well researched links if you are interested to Gurgaon or Mumbai real-estate.
