Top three cities to invest

In past three years it has been noticed that property prices increased sharply in most of the major cities in country and Bengaluru, Chennai and Ahmedabad are among top three cities from where one can draw the maximum ROI. While analyzing the property price figures for the duration of Jan to Mar 2015 quarter it is clear that the areas such as; Nungambakkam in Chennai, Silk Board in Bengaluru and Ghatlodiain Ahmedabad witnessed the highest price appreciation, which is the main reason of joy for those who have invested in above mentioned areas. However the analysis is following;

1. Area: Nungambakkam

City: Chennai

Due to latest infrastructure development work and other large projects in favor of Nungambakkam, its only re-development of old projects which led the property price to rise by the value of 8.18 per cent in Nugambakkam in last three months. Retail outlets, Government quarters, hotels and restaurants, are the main attraction of the area however the Nungambakkam is oldest habituated locality in Chennai. Most of the real estate builders have launched their new projects in the region however for some real estate projects construction work is underway, as per the statement of Velmurugan V, a real estate agent from a broker firm.

As Nungambakkam is close to city centre so it is easily connected with rest of the city however; Nungambakkam is mostly housed by the elites of the Chennai, NRIs and HNIs. Here property values in the range of Rs 14, 000 to 18, 600 per sq ft and it makes the Nungambakkam one of the premium areas of city.

2. Area: Silk Board

City : Bengaluru

In past three months the property prices for Silk Board have increased by 10.45 per cent. The main question is that what is working in the favor of this locality? So perfect answer is it’s all about strategic location and connectivity with Outer Ring Road as well as IT areas like; Electronic City, ITPL, and Marathahalli.

Due to being the premium and most busy region in the city Silk Board is famous for arguably being worst traffic spot, but in near future the place is going to witness the several infrastructure up gradation. Everyday millions of people pass through the CBS (Central Silk Board) junction including both public and private transport which is the main reason for long traffic jams.

However the construction work for Elevated Expressway is underway and it is expected that this Expressway will reduce the travel time between Electronic City and Silk Board Junction and it will also help the nearby areas. Current property rates in the area are around Rs 2, 600 to 3, 500 per sq ft.

3. Area: Ghatlodia 

City: Ahmedabad

Ahmedabad is not the metro city, but still the localities of Ahmedabad are able to provide good return on property investment as here few localities are giving strong competition to the premium areas of metro cities and for that the best example is Ghatlodia, as this locality has witnessed more than 8.11 per cent price appreciation in last three months duration.

Here most of the potential customers are the professionals, which are moving in city due to its relaxed lifestyle and affordability, as per the statement of Pragnesh Korat, who is real estate expert in Aakar Estate. The main advantage of Ghatlodia area is that this area is situated near by SG Highway, which directly connects the SP Ring Road through Science City Road. Ghatlodia area shares neighborhoods with some of the most develop areas as well as expensive localities such as; Naranpura and Memnagar. Current property rates in Ghatlodia area are approx. Rs 3, 300 to 4, 100 per sq ft.

Minimal drop in property sale in Mumbai

Even as Delhi and its surrounding region witnessed a 20% drop in sale, Mumbai saw marginal drop at just 2 per cent while Chennai and Hyderabad and Mumbai saw 18% and 13%, according to the 2014-15 real estate research survey by Liases Foras. Liases Foras, a non-brokerage firm, is into real estate researches. The survey was released on Thursday. It says that property sales across tier I cities in the country have dropped.  Proving that change in guard at the Centre has not changed the property market scenario.

The survey says that construction activity has increased in affordable and ultra-luxury segments in Mumbai. Flats that cost less than Rs50 lakh are selling more. Besides, the average prices have gone up in Greater Mumbai and Mumbai metropolitan region. In Greater Mumbai, this year a 2BHK costs Rs2.30 crore. Last year it was Rs2.14 crore… in MMR, a 2BHK flat cost is Rs1.32 crore while it was Rs1.20 crore last year, according to the report.

According to Pankaj Kapoor, MD, Liases Foras, “Currently, property market has been quite inflated and over-stretched. No one, including end-users and investors, wants to invest his/her money… and that has resulted in decline in property sales” . “Besides, there is a huge gulf between the current rates and expectations of end-users. They are still waiting for price correction. All things are attributed to the stagnant sales in Mumbai and other cities,” he told a newspaper. “Buyers cannot afford such costly houses. But developers have little choice. The land cost is already high and buyers have to pay various government taxes. If we meticulously calculate, buyers are forced to spend almost 10-15% of total flat cost on stamp duty, registration, valued added tax, service tax etc. To make houses affordable, the government should slash taxes,” Manohar Shroff, general secretary of the Maharahstra Chamber of Housing Industry (MCHI) demanded.

The Narendra Modi-led government cannot increase peoples’ income overnight. The current property market is beyond the reach of common man. An ineffective market will continue for some time. Despite low sales, developers are not bringing down prices. But they are offering sops such as waiving off stamp duty and registration charges to lure buyers.

If you are planning to buy home through bank loan, or your savings than make sure you are fully aware about the extra costs, which also known as hidden costs. These extra costs can be bit heavy on your budget and can increase the overall cost of property. If first time you are going to buy home, than you should research on these extra costs, as on the time of final deal you need to pay many other un-advertised and hidden costs.

In India, buying a home is not an easy task, as we all don’t want to bear an extra cost and on the same time we want to make smart deal, no matters its one-time fixed payment or ongoing payment plan even after possession. So, if you know the fact of extra cost, than there might be chances that you are prepare to hit your dream deal. First, you should know the basic selling price of property, which will be computed on the basis of size of the apartments. For Example: – If size of apartment is 1000sq ft and price is Rs 5,000 per sq ft then actual property cost will be 50lac, which means the Basic selling price is 50lac.

Some additional cost charge by developers/builders is below mentioned

Club Membership:

Nowadays every society in metro cities is coming-up with a club inside the residential complex, which provides the extra recreational facilities and few other activities. But what if you are professional and working from 9AM to 7PM, it means you will be not able to take utilize the club facilities and it’s clear that your family don’t need any of these facilities, but there is chances that still you need to pay the club membership fee because it’s not an optional in many of the cases.

External Electrification Charges (EEC):

When real estate developers charge the cost for wires and cables than in most of the cases it linked from the electricity meter of the apartment. These charges can include steel lighting, pumps, equipment, cables, common area lighting and installation of electronic meter.

Preferential Location Cost:

If you wish to buy an apartment on first five floors or on main road or pool facing, than you might have to pay an extra cost, rather than normal cost. Every builder normally charge an extra cost for preferred location

Un-finished Units:

In few apartments builder provides room with plug points, wires and other equipment, but no lighting, space for wardrobe they left but there will be no wooden doors for that, even in some cases builder provides sink but not modular kitchen furniture. So it’s recommended to check the credibility of developer and verify that they are providing these facilities or not and what is furnishing status of an apartment before an investment. 

Car Parking Space:

In society, developer offers the two types of parking, first open and second covered parking. According to the guidelines of Supreme Court in 2012, open to sky areas or covered parking (stilted) spaces cannot be sold by the developer or builder. Some of the buyers are still aware about these norms and facts as; developers are still charging an extra cost for parking space. If first time you are buying the apartment, so be careful about parking policy.

So, if you are going to buy the property than firstly check the cost sheet with the developer or an agent, which includes all other charges according to the choice apartment size.

Even as Mumbai city on Monday got it’s first and much-awaited seaplane service with the commercial operations have commencing from the commercial capital to Lonavala after the plane took off from Girgaum chowpatty, Mumbai for Pawan Dham, Lonavala, this event marked more than just the facilitation of transport service. It will also lead to a surge in realty prices in Mumbai’s hill station.

This seaplane service has now enabled the commuter to reach Lonavala in just 26 minutes, whereas via road it takes 2 hrs. It is expected that the new service will soon increase the property prices of Lonavala which is the preferred choice of many Mumbaikars who treat it as their summer capital.

There are many reasons for property prices in Lonavala to go up, not the least being the fact that Lonavala is one of the famous hill station in close proximity to Mumbai city, hence it is Mumbaikar’s favorite weekend destination. Many people have their second homes in Lonavala and visit there on weekends and vacations to relax.

With the start of seaplane service, the reduced travelling time will be very beneficiary for those people and will result in increasing their trips to the hill station. This will also attract more tourism and attract growth and development in the region, resulting to the increase in property rates.

As on today, property prices in Lonavala range from Rs. 4,500-Rs. 3, 000 per sq. ft. and with the commencement of seaplane services, it is expected there will be a significant increase in property rates in a couple of months, as demand for second homes will increase, said an expert property watcher. Environmentally, the construction sprawl in the Lonavala-Khandala belt, a favourite weekend retreat of many Mumbaikars, has been a sore point between the locals and their rich neigbhours from Mumbai. A property boom has led prices to shoot up 15 to 20 times in the past six years. Locals say the construction spree began with the entry of Mumbai builders. According to Lonavala developer Sanjay Devnani, prices were virtually stagnant from 1990 to 2004, increasing barely 5% every year. “The boom began in 2004 and since then, land rates have increased by 20 times.” Now that the sea plane service has been started, there is every possibility of the realty prices shooting up further high”, say developers.

The decision of the Reserve Bank of India (RBI) to keep  has disappointed the real estate fraternity that has already been reeling under a slowdown.

RBI Governor Raghuram Rajan has key policy rates on hold in his second bi-monthly monetary policy review, the first under the Modi regime.

According to Shrikant Paranjape, Chairman, Paranjape Developers, both home buyers and developers are disappointed with the RBI leaving the interest rates untouched. Paranjape said that this would have a negative impact on the already suffering real estate sector.

“We had expected the new government to bring hope to the real estate sector and the industry was looking forward to some relief in the form of interest rates being brought down. Business is already slow and I do not see a recovery soon.” said Paranjape.

Hemant Naiknavare, Vice President, Credai Pune Metro and Director, Naiknavare Developers, said that it would be favourable for the government to bring down the home interest loans to a single digit from the existing 10 to 11 per cent. He said that prospective home buyers are finding property rates and home loan rates quite high to make property purchases. “Housing is the biggest barometer of a country’s economy. There is a need to bring down the home loan rates to almost five per cent to fulfil the aspirations of home buyers,” Paranjape said.

Sanjay Dutt, Executive Managing Director, South Asia, of real estate consulting firm Cushman & Wakefield, said that the RBI’s stance to keep key rates unchanged was expected. “The RBI has stuck to its stance that there will be no rate cuts unless inflation is tamed. However, we anticipate that this is the end of a liquidity tightening cycle. We expect that the annual budget and monsoon will be key factors on the basis of which RBI will begin easing the interest rates.” Dutt said.

In the previous years due to highly quoted prices, Mumbai real estate industry had to go through slow down in sales and responses. Several projects were left incomplete due to lack of environment clearance, disputed lands, incomplete approval from authorities, and very often builders were lacking financial support. With the win of Modi led BJP as the new central government, real estate industry expects revival with efficiency in approval process and easier and smoother bank funding.

Currently, the main factors affecting the growth of real estate market of Mumbai are:

• Improved policies of government for boosting the real estate sector.

• State government’s take on its policies related to New Development-Controlled Regulations, Redevelopment, Slum Rehabilitation Act (SRA) and Floor Space Index (FSI).

• Impact of infrastructure changes across the Mumbai Metropolitan Region for boosting the real estate industry.

• Role played by MMRDA and MHADA in the real estate housing sector.

• Reasonable and affordable housing policies.

• Other various factors important for market dynamics like holding capacity of developers, their strategy for sales, acquisition costs, peer pressure for competition, premium on a brand, amenities involved in the project etc.

What about the factors affecting the property prices? These are land cost, price of raw material, technology, labour and others. The existing stock of homes in the city has been constructed with high prices of land and raw materials. Thus, it would not be fair to expect immediate price corrections.

So what are the actual demands or expectation of Mumbai real estate industry? Let us elaborate it:

• A confident government with firm policies for making reality market strong.

• Quick and single window clearance system.

• Easy availability of raw materials at subsidize cost.

• Tax incentives and simpler taxation system.

If all these problems are resolved successfully, it will be a great help in controlling the skyrocket prices in real estate industry and the dream of Modi’s government of ‘a home for all’ in a city like Mumbai will not be a dream anymore.

So, are we seeing any positive changes since the new government? Well, just even before the elections the Housing Sentiment Index (HSI) reflected the signs of improvement in consumer sentiments in Mumbai. HIS is a sentiment index of the Indian real estate market that captures buyer ‘mood’ and acts as a sign of changes in real estate market performance.The HSI improved by 24 per cent as compared to a rise of 5 per cent in the last quarter. The HSI for Mumbai has moved even above 100 for the very first time in four quarters and today it has reached up to 106.
Though with this year we have seen progress in the overall economy, still lot of work needs to be done to revive the lost confidence in the real estate sector. Start of 2014 was quite positive for Mumbai real estate as it saw almost 20 to 30 percent of increase in the sales but later closer to elections transactions started coming to a standstill.