Real estate investment in India
Nov 26, 2013
Source : The Times of India


MUMBAI: Nowadays coffee conversations with friends have changed. Being in the personal finance industry, friends always tend to ask – Suggest a good place to invest? Should I invest in Real Estate now? How does Real Estate look? Or, “Did you hear, she sold that flat recently? She had bought it for Rs 80 lakh and now sold it for Rs 2 crore! What an investment that was?

Being a financial planner has its upsides and downsides. The upside is that one can see and understand that real estate is a growth asset just like other growth assets. It will behave just like other growth assets i.e. move in a non-linear fashion as regards both, returns and risk. Essentially, returns from growth assets will be lumpy and will not show predictable behavior like bank fixed deposits that grow year-on-year. The downside on being a financial planner is trying to explain this concept of lumpy returns to friends and family, especially when residential real estate has been pretty much a one way street of positive returns year-on-year for the last decade.

A whole generation of Indians has grown with the experience that Real Estate prices cannot go down. The belief is Real Estate is not risky as prices only go up.

In behavioral finance, this generation is going through what we call recency effect. The euphoria that we have seen as far as Indian real estate prices are concerned, is seeming to blur the fact that the prices today may not really be going up but just staying stagnant. Given the way inflation has been in India recently, that by itself means that your investment is losing money.

So, how does one really look at Real Estate as an investment? What would be the factors to keep in mind?

Real Estate should be a part of your portfolio and not the whole

Do not put all your eggs in one basket. In our client interactions, very often we find that a lot of clients put most of their life’s savings into real estate. This would be challenging, if this sector does go through a downturn. Investment in real estate therefore, should be a part of your portfolio. How much? – would be something that your financial advisor would be able to guide you on.

Real Estate has its risks – liquidity, no easy exit routes

The recent liquidity crunch and falling sales faced by developers are bringing to fore the illiquid nature of this investment avenue. The National Housing Bank’s Residex, which shows housing prices across India, points to a drop in prices in the Apr-Jun 2013 quarter, across 22 cities as compared to the previous quarter.
Due to the supply glut in the market, investors looking to sell would find it tough to do so. While investing in real estate, make sure that liquidity is not a feature that you need for this investment.

Real Estate investments tend to be big ticket, thereby adding risk to their nature

Uptil now for most Indians, investing in Real Estate meant that they have to put in all their life savings, and all other investments into this one big investment they make. It also meant that all other life goals and investments towards the goals would be in jeopardy. This big ticket investment again is usually being made without much professional help.
This could be addressed once REITs (Real Estate Investment Trusts) come in.

The Securities and Exchange Board of India (SEBI) has recently proposed introducing REITs in the country. These REITs would use investor’s money to buy real estate for capital gains and rental income. The proposed REITs would provide the Indian investor an avenue to invest in Real Estate which is both professionally managed and also has exit routes, as they would be listed.

Therefore, it is crucial to align your Real Estate investment strategy with your overall financial plan.

Latest Realty News

2-BHK homes in Panvel or Kamothe?
Nov 26, 2013
MUMBAI: The price at which you get a 1-BHK apartment in Andheri or Ghatkopar, can get you a 2-BHK in localities like Panvel and Kamothe. These suburbs of Navi Mumbai have been witnessing a steady demand for 1 and 2-BHK apartments, owing to their competitive pricing. “A 1-BHK apartment in Panvel and Kamothe, sized between 500 and 700 sq ft, is available for Rs 35-40 lakhs and a 2-BHK apartment of 750-1000 sq ft area, costs anywhere between Rs 80-85 lakhs,” informs Paritosh Bhasulm of PropTiger.
Rental market shows upward trend in Boat Club Road, Pune
Nov 26, 2013
PUNE: The rental values in Boat Club Road have increased by more than 20 per cent in the July-Sept 2013 quarter, as per research. “Boat Club Road, along with its neighbourhoods Bundgarden and Dhole Patil Road, is arguably one of the best locations in Pune, in terms of connectivity and up-market feel. There are about 60 per cent investors who are well-off and have spare money to invest. They are reaping high returns today. Several Bollywood celebrities have also invested in proper
Worli society gets construction area 9 times the plot size
Nov 26, 2013
MUMBAI: The state Coastal Zone Management Authority has cleared floor space index (FSI) of 2.5 for the redevelopment of Worli’s Shivshahi housing society, part of a Mhada layout.
Is Mumbai a buyer’s market?
Nov 25, 2013
MUMBAI: Mumbai’s real estate segment has historically been red hot, something that is the aspiration of millions. The island city with less supply and more demand and the ever increasing migration, only meant that even if the market deviated from the conventional wisdom of economics in demand and supply dynamics, it still would be a sellers’ market. The price index, demand-supply gap, inventory and all other indicators collectively lent credence to this school of thought. Moreover, the island ci
Mumbai govt to help acquire land for cluster redevelopment
Nov 25, 2013
MUMBAI: Occupants of unauthorized flats and shops will be legally rehabilitated as part of the state government new cluster redevelopment policy. Critics said this sop is a virtual indictment of the government, which has failed to curb illegal constructions.
Citi’s HQ in maximum city on the block for Rs 250-315 cr
Nov 25, 2013
MUMBAI: US multinational financial institution Citigroup has put its old headquarters — Citigroup Centre in Mumbai’s Bandra Kurla Complex (BKC) — on the block, say sources in know of the development, reports Shubhra Tandon in Mumbai. This is after Citi moved its India headquarters out of this 80,000-90,000 square feet building earlier this year to a larger location in First International Finance Centre (FIFC), also in BKC. Citi had bought six floors measuring 3.12 lakh sq ft for Rs 985 crore las
Iconic properties in Mumbai in demand: Experts
Nov 25, 2013
MUMBAI: Prime properties are still fetching good vale in this land-starved megapolis even as rentals are seem to be falling, going by the recent trend of landmark buildings changing hands, experts have said.
Part II: Should you buy a new or a resale flat?
Nov 22, 2013
MUMBAI: Assuming that a buyer learns of both new and resale options in the location of choice, it is important to understand the benefits of opting for the former:
Part I: Should you buy a new or a resale flat?
Nov 22, 2013
MUMBAI: Should you buy a new flat or a resale? There appears to be no easy answer to this question. People buy resale flats instead of new ones for various reasons. Sometimes, a certain location just does not offer suitable options in the primary market.
BMC website with approved building plans
Nov 22, 2013
MUMBAI: The BMC is going ahead with its plan to put all building permissions on its website, a move that would have rendered meaningless the State Information Commission’s earlier order restricting access to the plans.

Latest Realty News Of State

Realty Talk's