Did you know that a slowdown in the real estate market is an opportunity for making money on real estate? This is no joke. Bust times are as much an opportunity to make money as boom times, say experts. It only requires structured market analysis to get your returns right.
Take the case of investors who have purchased at a frenzied pace during boom times. With the property market churn slowing down, many investors are exiting the market at cost price or even less. For instance, an investor who put in Rs 70 lakh (30-40% of the total cost of the property) in a premium project in Gurgaon, recently sold at a profit of a mere 7-8 lakh. And that too because he was able to purchase on the first day of the booking. For those who purchased 15 days after the booking began, the rates were higher. Those buyers have no option but to hang on or sell at a loss.
But this is a good opportunity for end users or long-term buyers to enter the property market. The developer has now started receiving final clearances and sanctions for the project and the project will start soon. This is good news for an end user who knows that his property will be ready in a finite number of months.
The end user today is also in the driver' seat while purchasing new property that has recently been completed or is nearing completion. Developers such as Supertech and Achievers are offering to pay the interest rate on the loan till the property is ready for possession.
Once he gets possession of the property, especially in expat-driven markets such as Gurgaon, Noida and South Delhi, the buyer can fully fit out and furnish the property for lease. “Once a premium property is fully furnished, you get Rs 30,000-50,000 more as rental values,” explains real estate consultant Ashok Narang. He gives the example of Laburnum in Gurgaon where monthly lease rentals range about Rs 1.5 lakh per month. But once the owner has furnished the property, he can easily get back Rs 2 lakh per month. “Furnishing involves an additional investment of up to Rs 15 lakh but yields monthly returns of about Rs 50,000 more than unfurnished property,” Narang says.
The trend of expats driving better rental returns is happening across segments of the property market too. Latest trends indicate that with every expat CEO coming to the country, there are four middle level manager who also come to India to accompany him. This segment is looking for well-maintained, well located, furnished and managed property.
They seek shorter tenures of lease but are willing to pay for services. Therefore choose your property well to get better yields. They should be in the vicinity of the economic hubs with good social infrastructure such as schools and hospitals as well as recreation facilities.
With the new thrust of lower rates of interest on smaller property loans of up to Rs 20 lakh, smaller property has started coming into the market. These are either in far-flung areas or of smaller unit sizes. Both are a good deal in the current scenario. If you are buying a property in a far-flung area, please assess the long-term merits of the location. When you start your purchase, it may look like the wilderness. But if you wait for infrastructure to come, the values will not be low. So assess the infrastructure plans of the area.
Developers are normally only too happy to tell you these details. For instance, in the Delhi NCR region, the proposed metro lines are a big draw. Property along metro lines are always good to attract end users. So check out the proposed metro plans before you buy. Expressways and bypasses also make a difference to the property rates. If you buy today, it will be two years before you can take possession of the property. If infrastructure comes in then or soon after, your deal is safe.
If you are looking at regular returns from your property investment, it is a good idea to buy even at a marginally higher cost in areas where there is good rental returns. In the last one year rental returns have risen by up to 15-20 % - 5-10% in the last six months alone. Gurgaon currently offers returns of about 4% and South Delhi areas offer returns of about 6%.
In cities such as Hyderabad and Bangalore, employers have started taking up small furnished apartments to service their own floating population. Techies who are in the city to complete a project often prefer to stay in furnished apartments rather than in hotels. Therefore investment in well-located and maintained apartment complexes with small units has become extremely popular. Technology companies are now leasing them in bulk so that all their employees can stay in the same complex.
If you have a transferable job and are wary of buying in one city from where you may be transferred out, remember rising rental returns are in your favour. If you buy today in the city you are stationed in, buy where there is demand for rental property. If you have to go to another city, either sell off the property and use that as the seed money to buy in the new city. Don't worry. There is nothing dramatic or radical about that. This kind of sale and purchase is done globally. Property investments have been considered a once in a lifetime decision only in India. Today, there are brokers who can help you sell in one city and buy in another at the same time.
If you are uncomfortable with that idea, do not think of lugging your furniture to the new city. Let out your flat furnished for better rental returns which will ensure regular income when you move to the new city. There are now a few tenancy managers who are interested in managing your tenancy for a fee. This may help ensure peace of mind along with regular returns.So go ahead and buy. Just make sure you assess all parameters well before you purchase.