Housing remains a popular investment option in India. Housing may not be as profitable as equities at the moment, but Indians do not invest in residential real estate for the sake of return on investment. The psychological value of owning residential property is enormous. It serves as the owner’s family’s financial foundation. It can be used for living or rented out — its value will always be preserved. This is why second homes are so popular throughout the country.
A residential property, on the other hand, cannot be sold quickly. In previous years, Indian residential investors would experiment with the Western strategy of flipping properties, buying low and selling high within a year. But that no longer works. During those years, the Indian housing market was less regulated, and many parts of the country were hotbeds of speculative buying and selling.
Such investors have almost completely vanished from the market today. Investors’ expectations of property investment returns have become more realistic, as in the matured markets of the West. Previously, they could frequently obtain an annual RoI of more than 100% in the property market. Housing prices are now kept in check by supply-demand adjustments and stricter regulations. In most cases, you can expect capital appreciation of no more than 4-5 percent per year on good properties.
Other than for residential purposes, one of the primary reasons for investing in a residential property is to earn consistent rental income. If you are purchasing a second home to earn rent, it is critical to understand the type of house that will be in high demand among tenants.
Location is the most important feature of a good rental property. The property must be near or well-connected to the city’s major business districts. BKC in Mumbai, for example, is a major business district. As a result, areas such as Kalina, Vakola and Chunabhatti which are well-connected to BKC, are in high demand among employees looking for rental homes.
There are a huge number of inexperienced and new developers entering the market. These newcomers are eager to start working on their enterprises and make money quickly. Selecting a developer with extensive experience in the real estate industry is essential. It is best if a developer has been around for a while. A seasoned builder is more likely to comprehend your requirements and produce projects that check off the majority of the checklist’s checkboxes. Examining the builder’s prior work is advantageous for you as the buyer as well.
In most Indian cities, two- and three-bedroom apartments are generally affordable and popular among middle-class tenants. Investing in a bungalow or villa in an area where there is no demand for homes that are too expensive to rent makes little sense. If you want to invest in a large luxury property, look for areas where such a home can be rented.
If you overpaid for a property, you will struggle to earn enough to cover your initial costs and make a rental profit. However, one should not look for the cheapest home. Such apartments are either too small to be appealing to tenants or are in low-demand areas. A property’s price today should be compared to where it was 4-5 years ago. If you decide to sell the property in 5-6 years, you will want to make a profit.
One must carefully examine the infrastructure in the surrounding area, including everything from road and rail connectivity to the availability of schools, hospitals, and shopping districts. Consider yourself a tenant and ask the right questions to determine whether a property can generate a good rental income.
For example, consider the following important questions:
Some projects and properties, even in the same location, are more appealing than others due to superior amenities and facilities. A two-bedroom apartment in an integrated township provides a far superior lifestyle than a comparable unit in a smaller project. A project with a clubhouse, a swimming pool, and a jogging track is more appealing to tenants than one without such amenities.
Purchasing a good residential property is still the best investment option in India.
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