Raj aristos common update - Real Estate Market could Gash in 2013

Investing in property definitely has been a punch for the middle class people in India who challenge. Over the last decade, the property values have increased by four times on an average.

Indicating the slow sales and rising inventories, real estate experts say that till now the real estate has benefitted from the dream of the common man to buy home, but recently more signs show that this trend could be ending very soon.   To prove this, a recent report in Economic Times shows that there is a surplus of independent homes in South Delhi and the story is same in separate micro-markets around the country.

Hence, this situation arises a question that could real estate in 2013 could crack.  In order find answer for this question, let us go back a decade ago and take a look at the real estate strategy:

First, let us start between the period of 1995 and 2002, when the Indian economy was at an annual rate of 4.9%.  According to a developer in Mumbai who wanted to remain anonymous, a year ago the real estate prices eased by 2-3% in many large cities and by the end of 2002, year-on-year decline were by 20%, which was extremely steady.  He also added that the growth by 5-6% for three years and a similar situation may be continued.

Second, the entry of many proficient real estate investors; over the past 10 years, the market has witnessed an increased number of middle class Indians who wanted to invest in property, whose hypothetical behavior was same as the middle class Americans, who bought houses just for a 15-20% profits in a couple of years.

The real estate situation in India roughly in 2013 is the same, where investors’ buyer properties in real estate expecting for a 20-25% gain every year.  But, Sanjay Dutt - Chief Executive at Cushman and Wakefield said that if a developer sells 2,000 flats and 70% of buyers intend to put them on the market in a couple of years, then those should not be considered as sales.

This creates a circumstance, where houses in under-construction projects in large metros are offered anywhere between Rs 1,000-1,500, which is less than the builders selling price. At the peak of this situation, it is likely that the market would rectify.

Last of all, according to the Ministry of Housing and Urban Poverty Alleviation (MoHUPA), in urban areas around11.09 million homes are lying vacant.  Sellers keep it vacant hoping for an increase in capital values in the market, whereas the buyers think the current prices are unreasonable.  When the stocks pile up, then this could also warn for a price correction.

Raja Airstos News - Expected Appreciation Rates for Commercial and Residential Properties

The possible appreciation levels are the prime factor that people consider while opting for a property, commercial or residential. However, it is not possible to calculate an exact appreciation, only assessment can be made. Many factors come into picture in the analysis; the location, type of property, proximity to important areas, age, the development that took place, possibility of development in the future, the level of maintenance done and the inflation rates could influence the property value.

A property in a premium location, such as close to the city center, near attractions or near educational/medical facilities would experience a more or less steady flow of takers when compared with properties in remote areas. However, of late, many are showing interest in outskirts or far-fetched areas in view of exceptional development possibilities and much lower price. This way, you can look forward to great returns on small-level investment.

A well maintained property is always attractive than those with poor upkeep. Also, the age of property matters a lot, though it is not always possible to generalize, a rough calculation shows that a period of three years is fine.

Many experts are of the opinion that though should be based on the area, a property retained for a minimum of three years stabilizes your income potential. And it is ideal to wait for 7-5 years if looking for profit. Again, certain areas have got immense potential for great returns within a few months, for instance the Delhi NCR.

Also properties in an area with low tax rates and an increasing population would have a positive influence on prevailing rates. Improvement done on the property is also an encouraging factor for increased appreciation. The supply and demand ratio is yet another factor to affect the appreciation.

Commercial investments in premier locations could give buyers steady and safe rental income and property appreciation could be beyond expectations. In fact, many are of the opinion that a commercial asset is more income-generating than a residential property.

The initial investment for commercial structures could be more, but is worth it, points out experts. Still, a detailed assessment of documents is mandatory for a safer investment. 

Below is an overview of some of the prime locations in the country with great growth potential for residential properties.

With huge infrastructure projects in the pipeline, places like the Dwarka Expressway, New Gurgaon etc are likely to attract a lot of commercial and residential buyers looking for significant returns. The eastern suburbs in the Mumbai city are again potential investment regions. Bangalore looks forward to a steady supply and the increase in prices has been up to 10 to 30 % within a year.

According to Amit Grover, DLF Director, commercial spaces in chief Sectors in Noida are worth investing. A mall space of minimum 3,000-5,000 sq ft is needed for an ideal investment in Gurgaon. Bangalore offers many options like Bannerghatta Road, ORR and Indira Nagar. Areas like Viman Nagar or Kalyani Nagar are suggested for Pune investors.  In Mumbai, Gurgaon, metro regions, navi Mumbai, thane are good options. Ambattur and Guindy would be viable investment choices in Chennai.

Raja Aristos Commonfloor Tips - Key Questions Investors Should Ask Before Investing in Real Estate Funds

Planning for a successful investing with a huge sum of money, then it entails a various research in depth, if you want your money to be safe and profitable hands.

Here are few basic questions that an investor should be prepared to ask before investing in real estate funds:

·       First and foremost, check who is promoting and managing the real estate fund.

Making a thorough background check of the promoters of a real estate fund and its management is an essential one. Funds registered with SEBI have to stick to certain minimum conditions such trustees to oversee the investment and compliance issues, proper managerial staff, providing their investment schedule and raising the targeted amount.  The promoters should also bring in a minimum of 2.5 or 5 % of the quantity, depending category of fund and size.

The real estate funds mopped money from investors like wealthy individual owners or private trusts and funds through the Venture Capital (VC) fund regulations of SEBI, till 2012.  The minimum investment should be Rs. 10 lakh but most funds accepted minimum deposits around Rs 25 lakh.

According to AIF (Alternative Investment Fund) Regulations by SEBI for real estate funds, hedge funds, private equity, and others, the funds member should not be less than 1,000 investors and the minimum investment amount could be Rs. 1 Crore or more. 

Head Real Estate of Arthveda, an investment management firm of DHFL, Mr. Lalit Kant, says that all the new real estate funds should be registered under the AIF guidelines that would allow only really big investors’ to partake and would daunt small investors.

·      Make sure that by choosing these funds will you obtain the diversification that you want to add in your portfolio

Frequently, private real estate funds invest in a variety of properties or under-developed projects with the profits as capital gains when the fund exits from a development of project. Investors should always inspect the investment summary of a fund and the type of properties in which the amount will be invested.

Sanjay Dutt, Executive Managing Director of Cushman & Wakefield suggests that an investor should also question that how a fund invests moves down to the actual team of the fund manager and the composition of the investment committee, what is the idea of the fund, whether it is a capital appreciation one or an income fund, the investment is in residential or commercial property and in which region.  Asking all these questions will help the investors to invest with a trustworthy real estate funds and will also give a right direction to the investment.