Like stocks, each property has its own
peculiar plus and minus points. Yet it
is not practical to quickly exit property once purchased, like you could in the
case of stocks, because property is subject to high transfer charges, illiquid
markets, indivisible investments, etc. So, carefully choose the property in
which you plan to invest by doing your homework thoroughly. Here are a few of the important criteria that
you must mull over before investing in real estate.
Location:
In
real estate, what matters the most is the location of a development. Two developments, may be same in all aspect
except the location, and takers for each will differ.Hence,location is of key
importance while selecting where to invest.In fact, selecting the right
location for investment is very essential to build a well balanced portfolio
that will yield expected returns.
Selection of location depends upon the property segment in which you
wish to invest, i.e.commercial, retail or residential. The ability to choose an
optimally located property gives an investor an edge over the others.
Here
are some pointers that should guide you while choosing the location for your
real estate asset:
1.It
is advisable to identify a place where there is no slum, drainage line or a
place of worship nearby.
2.The
area should have well developed infrastructure and should be well connected
with other locations by public transport.
3.Avoid
property constructed in low-lying areas, as these are susceptible to flooding
during the rainy season.
4.The
location should enjoy proximity and accessibility to work places, a market
place, schools, colleges and recreational centres, in case you choose to investin the residential segment.
Infrastructure
Access
to infrastructure facilities and amenities is one of the criteria that make a
property prime. So, when you select real estate for investment purposes, make
sure that the capacity of the surrounding infrastructure / water facilities,
sewage and drainage, road and rail connections, electricity, etc.) is adequate
to sustain the needs of the future population growth.
In
most of the new complexes being set up or the residential projects being
developed, club use and recreation facilities are being provided for:These
could enhance the value of your investment.But a word of caution here – these amenities add to the monthly
outgoings.
Ready Possession versus under construction
If you plan to invest in residential
property, it is always more lucrative to invest in under-construction projects
since in this case payments are staggered over the duration of the construction
and there is usually a steady capital appreciation from announcement of a
project to its completion. So, for
investors who expect capital growth in a short time frame, investment in
under-construction property is the right option. However, new buildings attract higher
property taxes and maintenance charges and the loading (difference between net
useable carpet area and chargeable built up area is also higher compared to
older buildings. The loading could range
between 25-40 percent depending on the project.
For
investors who are interested in holding assets that generate steady rental
incomes, investment in ready possession property offers a better option.
The
downside for ready possession property is the time required while marketing it
for sale (generally considered around 6-9 months) and loss of rent suffered
during that period. Further, the possibility of capital appreciation is very
limited as ready possession property already attracts premium over market
rates.
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