Real estate investment has been an integral part of an investor's portfolio. However, buying a piece of property is not an easy decision as one has to evaluate many factors including appreciation value, investment benefits, builder reputation, legal hassles, home loan, etc.
By Avnish Yadav
Real estate investment has been an integral part of an investor’s portfolio. However, buying a piece of property is not an easy decision as one has to evaluate many factors including appreciation value, investment benefits, builder reputation, legal hassles, home loan, etc. Real estate properties come in different forms, such as affordable housing, need-based housing, semi-luxury and super luxury homes. In today’s current market scenario, there are five factors that homebuyers should focus on prior to zeroing in on any property – location, entry point and financial capacity, reliability of the developer, facilities and rental return.
Location: Location is the biggest appreciation driver while buying a residential property and therefore should not be ignored. The quality of the location will determine the value of the property in future. Thus, the existing and upcoming infrastructure in an identified area can have a positive bearing on the value of the property. Also, a proper analysis of the demand drivers is of the essence to understand the investment potential in the vicinity. Factors such as commercial offices, metro connectivity, hospital and proximity to markets can have a cascading effect on the property. Therefore, the buyer should have a clear idea of the location and in-depth understanding of the appreciation dynamics before investing in the property. The buyer should not choose an area with no infrastructure and connectivity as most of the developers promote these projects with low purchase prices. On the other hand, buyers should leverage their budget to invest in a good location in order to reap benefits in the future.
Entry point and financial capacity: While the current market scenario presents an opportune time for the buyer to buy the property considering the fact the residential properties are at the lowest point and developers are also offering various schemes and payment plans which are usually witnessed during the festive period. Apart from this, the buyer should also ascertain how the basic sales price of the property is derived along with the additional cost attached to the property in order to calculate the home loan and EMI that the buyer has to pay for the next few years. Therefore, one should be aware of the final purchase price of the property and not just the basic cost of the property prior to availing a home loan.
Reliability of the developer: Choosing a right developer with credit history has become an important criteria for property investment as delay in delivery will hamper one’s investment. Good quality of the project and final delivery attract clients towards the product. One should invest in property marketed by reputed developers as such builders do preserve their reputation in the market as compared to fly-by-night developers who make tall promises and do not deliver the project on time. Additionally, reputed developers help in creating higher valuation of the property and try to improvise their product to deliver higher value to the customer for future re-investment.
Facilities: Today, buyers are not looking for a house but they also need proper facilities and features such as club, swimming pool, security measures, power back-up and other benefits. One should invest in property where he/she can create his circle of friends or like-minded neighborhood and the family can enjoy every single recreation activity within his condominium and do not have to move out to avail such services.
Rental return: Rental returns in India are less than 1%, but at certain prime locations they account to more than 1.5%. Going forward, this will be an important criteria for the buyer to be consider while making a property investment decision. Most of the investment happening in international residential market takes place due to higher rental yield compared to India. For instance, if there is higher demand for a particular property, the rental yield of the property will always be higher as compared to other properties in the same location.
(The author is Deputy General Manager, Residential Services, Colliers International India)