MUMBAI: A big garments exporter in Mumbai wants to invest his kitty of Rs 50 crore somewhere, but neither does the stock market have appetite, nor is gold cheap. His only other option is real estate, but in Maximum City, yields are falling sharply. So, his wealth manager has now advised him to invest in properties in Adayar — some 1,300 km away. Adayar, in south Chennai, is one of the southern city's most expensive neighbourhoods.
It has given a return on real estate investment of a whopping 110% in the last five years. If you had invested Rs 1 crore in an apartment in 2008, it would now fetch you over Rs 2.2 crore.
But hold your breath, analysts say prices haven't peaked yet — houses in Adayar will become even pricier over the next few years. "Chennai has overtaken Mumbai in our portfolio this year," says Deepak Parekh, chairman of India's biggest housing lender HDFC LtdBSE -2.61 %. He adds that the city has not only been a consistent performer in recent years but is also expected to boom further.
"Chennai has fast developed into a manufacturing hub. Carmakers like Ford, Hyundai and Renault-Nissan and as well as several other industries have set up factories here. But now, we are seeing large telecom and IT industries also making big investments creating more opportunities in the city.
All these will lead to high growth in home demand and prices will shoot," he points out. Adayar is among several such micro markets around the country, where investors could chose to invest their money now and rake in the moolah when the tide turns.
Analysts say that if one has the money, he or she should look at options like Adayar, Baroda, Surat, Gandhinagar, Rajarhat in Kolkata, micro markets in Pune like Kharadi and Hinjewadi and new emerging locations in NCR to invest as they are now available at lower prices but will boom once the economy settles. "Buy properties between Diwali and Gudi Parwa when the markets will bottom out.
It has given a return on real estate investment of a whopping 110% in the last five years. If you had invested Rs 1 crore in an apartment in 2008, it would now fetch you over Rs 2.2 crore. There will be a big pick-up possibly after elections," says Sanjay Dutt, executive managing director of South Asia at Cushman & Wakefield, a real estate consultant, which advises large builders and real estate investors. Some of these micro markets such as Adayar and Velachery in Chennai logged the best returns of around 100% over the last five years. Places in south-central Delhi have seen prices going up by 114%. Pune's Koregaon Park and Aundh, where prices have risen 75%, still offer options for value investors.
"Though they have been growing very fast, prices here have still not yet peaked," Dutt adds. In many of these markets, ET had reported on Monday, prices have softened by around 10% in the past six months. Dutt says that correction in few markets has already started in northern cities. "In Mumbai, we see a possibility of correction in Lower Parel, Sewri, Kurla-Mulund belt and Goregaon.
But these will be short windows of opportunities and may last for a few months." Those who invested in real estate in these micro markets in 2008 made more money compared to investing in stocks or gold. Bombay Stock Exchange's 30-share benchmark index, Sensex, rose a mere 16% during this period. Gold may have given over 155% returns over these five years, but performance over the last two years stands at 17% against an average 20-50% jump in property prices. "These property markets, particularly Chennai, NCR and Pune were under-priced and had to catch up with rest of the markets that had already moved up.