Bungalows Versus Flats
Dec 06, 2013
Source : The Times of India


DELHI: Assuming that one has the financial wherewithal for this to be an option at all, the question of whether to invest in a bungalow or a flat is indeed pertinent. In an established area of a large city like Pune, a bungalow costs a lot more than a flat. This means that the rental market for such a property shrinks proportionately.

Investing in a Bungalow

If we set the considerations of location, ticket size and potential rental yield aside, the primary advantage of investing in a bungalow rather than a flat is that one secures more land. In any location, it is the value of land which determines the value of built-up property. Unlike a flat, a bungalow and its compound lock-in a significant piece of tangible land. This fact gives a bungalow a higher value in real estate terms. Also, the investor must have a suitably long investment horizon and not be looking for short-term returns. But the maintenance cost and property taxes involved in a bungalow are higher than those of flats. This long-term financial implication must necessarily be factored-in while considering investment in a bungalow.

Investing In a Flat

Flats offer a slightly different value proposition than stand-alone units such as bungalows. In the first place, the share of land that is legally allotted to each flat in a project is much lower than that of a bungalow. The primary value of a flat lies in the space that it occupies, which is why larger configurations such as 3 and 4BHK attract higher rents.

Location dictates the ticket size as well as rental income. The rental market for flats is much larger than that of bungalows, so finding tenants is easier even if one factors-in a certain degree of tenant churn. However, one must ensure that one is investing in a flat whose size dovetails with the median income profile of the location. The highest demand will always be from the locality itself, and from people working in offices and industries close to the area.

Buying a flat whose size puts it out from the local demand profile can be a self-defeating and costly mistake. Generally, the 1, 2 and 2.5BHK configurations are the safest investment options in any area, since the rental demand for them is always the highest. With ultra-premium flats as an exception, maintenance and property tax for apartments is significantly lower than for bungalows.

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