Don't wait longer to buy a home

Mumbai: One sector, where demand does not seem to be going down, is real estate. Several reports suggested that property prices would cool off post Diwali and all those who wanted to buy a house were waiting for this period. Now that Diwali is over, have property prices finally started to cool down?

Price check"Prices are still on the rise and we don't see them coming down soon. Developers have purchased plots at expensive rates and will sell them at higher rates," said Sanjeet Narain, managing director, Narain Corporation. He also adds that the demand in the market is ever increasing and the supply is less. So prices will be on a rise for a while, however, they may stabilise after 12 months.

Experts say that the infrastructural development like sealinks, flyovers, highways and also malls coming up in India has been the major reason for prices to go up.

Property consultant, Ramesh Nair points out that in many markets, be it residential or commercial, major price increase has happened in the 12 months since May 2005. "Prices are rising even today but not as much as then. It is not going to be a drastic increase as we saw in the first quarter of 2006."

In certain pockets of India, prices have grown upto 200 per cent. However, Nair says that prices could fall in certain over-heated pockets of the city but the fall may be just marginal. He cites the following reasons for the correction being only marginal:

• Speculators leaving the market
• Rental rates going down
• Interest rates going up
• Demand increasing in certain parts of the country

Should you buy a home to live in now?Narain suggests, "Someone who is planning to buy a home should not wait any longer as prices will keep going up. He should go ahead and buy it now."

Narain recommends that in ready possession properties, one should invest in the suburbs, as the demand is more there, hence chances of a price rise are higher.

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"In Mumbai, over the past 30 months, prices at suburbs have increased from 40 per cent to 130 per cent," said Mumbaipropertyexchange.com CEO Sandeep Sadh. From Andheri to Borivili, Kurla to Mulund and location surrounding BKC will be on a peak.

Therefore, if you are planning to buy a home to live in, and you have a budget big enough to buy it in the city's central location, understand that you may not get high appreciation. If you are looking at home, along with getting the benefit of real estate boom, buy a home in suburbs.

Ravindar K Vanwari, Director of Investment, AAkarshna Realtors, makes an interesting point. He says, "Property seekers may go ahead with their plan but I suggest that they should buy home with original booking only and not by paying premium on it."

Original booking price means the price at which the builder is selling the flat even before the building is ready and is yet under construction. This price is generally less than the ready to move in price.

For instance, original booking price of a certain complex in Bhandup was Rs 2,500 but now, on completion, it has gone up to Rs 4,000 and is expected to go further up. Original booking price is generally low due to many reasons, one of which could be the risk that the builder may or may not finish the building.

However, if you are planning to buy a ready apartment, try to bargain to get the closest price at which the developer sold the flat when it was under construction as against the price he quotes for a ready apartment.

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Nair recommends that you do an in-depth analysis before buying property, since price appreciation will vary from area to area. Look at the price trend in the last few years in the particular area, infrastructural development in the city and the location, future attraction and also how the property looks from a long-term investment point of view.

This means that schools, connectivity, stations, depots, SEZ, highways, malls, entertainment centers so on and so forth should be not more than half and hour's distance from home.

"We ask all our clients to follow one policy. When a man is looking for a house, his first priority should be for kids, second should be for wife and third should be himself," said Sadh.

Therefore, make sure that:

• Your home should be at a good proximity to your kid’s school. Since he is going to be in the same school for about 12-15 years, it may not make sense if your kid has to spend time to travel far off.
• Hospitals, markets, bus depots and railway stations are other important necessities you must look for.
• You should be ready to travel for work but do not compromise on the above-mentioned areas. You may change your job in the next three years or your office might get shifted to some other place. Therefore, buying a home near your workplace should not be the priority in your wish list. However, if you are lucky to get a right one, then off course, what can be better than that?
• You should also preferably look for amenities like swimming pool, sports club, gym etc either within the residential complex or near by. All these facilities will help your family for recreation and refreshment.
• Opt for higher floors since that helps to keep away from dust. You also get to enjoy all climatic conditions in India, be it winter, rainy or spring.

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Property as an investmentSince experts believe that prices will still be on the rise, investing in real estate won’t be a bad idea. But Narain recommends one must invest only in under construction properties, as the prices of under construction properties are lesser than the ready ones and will increase on possession, hence better profit on possession. One can buy at a cheaper rate, enjoy appreciation and then sell it at a higher rate when the building is ready for possession.

By investing in a property at an early stage, you also get an option of choosing the floor, sight facing, and various other amenities.

Nevertheless, one must look at the real estate sector as a long-term investment.

Vanwari avers, "A person who holds his property for 15-20 years gets more returns than an investor who buys and sells property after every six months. By doing this frequent trading in property, a short term investor may be happier but at the end of 15-20 years, the investor with a long term view will benefit more."

Since every time you buy or sell your property, you may have to pay various taxes like property tax or capital gains tax, the returns may look lucrative but it may not necessarily be.

"Investing in land is better than investing in apartments, because yields on apartments have dropped from 5.5 per cent to 4 per cent," said Nair.

All underdeveloped areas and new townships like Faridabad, Mohali or Noida will give a good capital appreciation in the coming years. But you must also look for connectivity - the place should be well connected to the main city. In this case, quite a many under developed areas are being connected to the urban areas with the help of newly built highways, flyovers etc.

Basically, all prospective buyers should look at peripheral location where infrastructural developments are happening that can be classified as growth corridors of the city.