Looking to invest in real estate?

Right now, there is a pressure on property prices, which bodes well for increased rental incomes.

Real estate is often the most comfortable investment because growing up, the importance of owning a home has been ingrained in our mindsets. There are varied reasons why people consider investing in real estate: high tangible asset value, tax-free cash flows, portfolio diversification and so on.

It is a known fact that demand for real estate is directly proportional to growth in the GDP. Hence, it is not surprising that it offers excellent hedging capacity to investors. Right now, there is a pressure on property prices due to higher inflation and imbalance in demand-supply. This bodes well for the property rates and increases the rental income.

CBRE estimates that economic growth in the Asia Pacific region will remain ahead of the world average in coming years. This explains the vast demand for commercial and residential properties. It also explains that overall investment turnover in the Asia Pacific will increase significantly, therefore delivering decent returns in the real estate sector.

However, there are many challenges that come in the way of rental property investment. Sometimes, all the lengthy and complicated procedures can be too overwhelming for us. Inherent market risks and fluctuation are inevitable in this sector. But a thorough understanding of the sector and potential localities, floating loan schemes and options can help one get the most relevant and profitable deal.

Usually, an investment is considered worthwhile if the property fetches you a capital appreciation of minimum ten per cent. For good returns, location is the supreme criterion that one should pay attention to.Here are some important criteria that should be taken into account while deciding on a property solely for the purpose of investment:

The right location

One should always look at investing in an area which has the potential to grow in the coming years. A property price in a pre-established area is not only high, but also comes to standstill after a certain period of time as there is least scope of development around that area. Improving infrastructure and sniffing its potential growth at an early stage can help you freeze a fair deal. If you plan to rent out the property, choosing a location with potential tenants becomes all the more imperative as it helps to avoid the future crisis of the property being empty for a long time.

One should be completely sure that the area or the locality of the property is in demand for the house to go on rent. Properties close to airport, railway station and business district often command a much higher rent as they possess a greater scope of development.

A reputed builder

An important part of the home-buying process lies in determining that you are dealing with a builder, who is able to deliver the property as per your expectations. Choosing a wrong developer can lead to multiple consequences such as irregular amenities, missing regulations, rejection of loan by the bank due to bad reputation of developer and so on.

The deal with amenities

The value of the property automatically increases if you have general amenities like hospitals, schools, cinema theatres, shopping complexes, fitness centres and so on, within the proximity of the property. If such amenities do not exist, then there should at least be a scope for such expansion. Keeping in mind the easy accessibility to basic facilities, builders today are developing integrated communities that not only provide facilities like swimming pool, gym and parks, but also other conveniences such as hospitals, schools and office spaces. 

Issue of public transport

The property will fetch higher rentals or good returns if it has easy accessibility to public transport like bus and metro. This is one of the most important considerations as close proximity to public transport reduces the travel time to a large extent. So, check whether the area is well-connected to the main areas of the city. Having said that, don’t go in for a home right next to a public transport centre as the constant noise will deter many.

Scope for growth
In a city like Bengaluru, where there is a dearth of space, many corporates are thinking of moving to peripheral areas. Look for an area where these corporates are likely to move their base, as these areas hold a scope for tremendous growth and immense potential for good returns.

Smart finances

It is very important for the investors to know what’s coming their way. Walking into a bank and asking for a mortgage without doing prior research can be profitable for the bank and not for you. So, it is always advised to look around for the best deal before deciding on a particular bank.

Zeroing in on a decent, profitable investment requires strategic management to ensure long-term gains. So, choose wisely and reap rich returns from your property.
(The author is general manager, marketing, House of Hiranandani)