How to profit from residential property investment

Last Updated: Tue, Jun 06, 2017 12:17 hrs
Real Estate (Image Courtesy: IANS)

Real estate is globally a potentially lucrative investment asset class and estimated to grow by 30% in volume and scope in the coming decade. In fact, Forbes, the global media company has predicted that the Indian real estate industry would grow at 7% in 2017.

Real estate investment as such may sound enticing but making money still remains a tricky proposition. If you are one among those considering it, you must invest time in understanding the market and factors that make such investments profitable.

Find growth corridors

One would have observed that property investments in cities like Mumbai, Pune and Bengaluru have yielded satisfactory returns. But location alone should not drive your investment rationale. In fact one should evaluate the the availability of growth corridors too.

A growth corridor is a property that is complemented by easy transit routes, public transport nodes, shopping centres, schools, hospitals, parks and other public spaces. The more such amenities, the greater is the incremental growth of investment.

For instance Mumbai's most lucrative residential property investment hotbeds have been areas like Wadala, Chembur, Andheri, Mulund, Kanjurmarg and Ghodbunder Road in Thane. These are not necessarily the most expensive areas in Mumbai, but they offer property buyers the advantages of good properties by reputed builders, excellent connectivity with various important parts of the city and decent social infrastructure.

Rental income

Rental income should be on top priority, even if the end-objective is capital appreciation. Rental income can help pay part of the EMI outgoings in case the investment is purchased on a bank loan. Renting also assures regular maintenance of property' fixtures, fittings, and plumbing. Investments made into locations connected with economic opportunities can also offer better returns.

For instance, In Bengaluru, areas like Nayandahalli, Hebbal, Yelahanka, HSR Layout and Sarjapur Road have seen fastest appreciation for being growth corridors. These areas are well connected with the Inotech sector, the biggest economic driver, and are relatively affordable and well-connected.

In Pune, the best locations to invest in residential property include the slightly pricier Wanowrie and Kharadi and the more affordable Undri, Wakad and Ambegaon. The latter three locations have the advantages of competitive property prices, fairly rapid appreciation because of new infrastructure coming in, and excellent connectivity to Pune's many workplace hubs. Residential projects by reputed developers are in great demand here, not only for purchase but also from rental housing seekers.

How long should you hold

Every growing location needs time to come into its own and become a full-fledged flourishing market. In the process of getting upgraded, it also draws increasing demand from homebuyers. Meanwhile, every property market goes through its ups and downs - it is very rare to see sustained growth in any location, and there will be 'low' periods and sometimes even periodic de-growth. This is why in India, the ideal 'investment horizon' - or the period of time for which one should remain invested in a property - is between 4-5 years or longer if possible.

In this time, considerable growth in a property's value is more or less assured regardless of market fluctuations. This is the same reason why one should remain invested in instruments like mutual funds for at least the same period. For the patient investor who has chosen his or her property after enough market research, turning a profit is never an issue. This is why in India, residential property remains such a popular route to growing one's wealth while simultaneously attaining financial stability and security.

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.