With the high prices of property in the central business district (CBD) areas, the suburban and peripheral locations are favoured by investors now. This is especially so when the budget is not too high and they are comfortable with the lead time. The scope for capital appreciation during the project’s implementation period is high in such cases. With more land available, improved connectivity and proximity to IT corridors, the suburban and peripheral locations are witnessing the emergence of a number of residential projects at competitive prices.
The market witnessed the launch of around 22 residential projects across micro-markets during the fourth quarter of last year, offering a total of 3,515 units against 7,817 units offered in the third quarter. Meanwhile, 16 residential projects comprising 4,529 units across different micro-markets were withdrawn from active stock as they were completely sold out, according to Jones Lang LaSalle market survey.
The Hosur Road micro-market comprising Electronic City, Bannerghatta Road, Sarjapur Road and the south-east parts of the Outer Ring Road contributed 39 percent and the Bellary Road micro-market accounted for 26 percent of the new launches witnessed during the fourth quarter of last year. While the suburban property prices range from around Rs 3,990 per sqft to around Rs 8,100 per sqft, the peripheral locations cost from around Rs 2,200 to around Rs 5,990 per sqft. Villas and duplex homes are available at around Rs 1.5 crores.
Capital values have stabilised across various micromarkets. This provides an ideal opportunity for residential property investors in suburban and peripheral locations to earn competitive yields on investments. Rentals are up due to the steady influx of people, mainly in the IT/ITeS sector. With the resumption of hiring and hikes in salary levels by 6-7 percent, there is a renewal of interest among many to invest in second or even third homes, according to property developers. This is attributed to the price appreciation and the rental prospects likely to emerge in the changing market scenario.
The recent hike in home loan lending rates has not had much of an impact on the overall demand pattern for housing. Concessional home loan offers are being extended by some banks till March 31 to encourage more investors. Factors such as a hike in construction costs by 12-15 percent over the last six months and the capital appreciation witnessed are nudging NRI investors to take an early decision. The presence of professionally-managed property management companies should augur well and convince NRIs with their hasslefree maintenance services during their absence in India.
With improved connectivity, the demand for residential units in the vicinity of IT/ITeS companies is likely to go up including the scope for rental accommodation. As a result, investors are looking at suburban and peripheral locations for the right option to derive maximum yield.
Investments in suburban and peripheral areas offer immense scope for price appreciation due to prevailing competition, attractive prices and the growing demand for residential units, say industry experts. Besides, the demand for rental accommodation is up due to the emergence of such units in proximity to IT/ITeS companies. It makes sense for NRIs to invest in such units as a part of the repayment towards the home loan can be offset through rental income. Moreover, there is no wealth tax on a residential unit that is leased for a minimum period of 300 days in a calendar year.
Further, there is no restriction on the number of residential units a NRI can buy in India but the repatriation of sale proceeds is restricted to not more than two residential units after a lock-in period of three years. However, rental income can be repatriated every year after payment of appropriate local taxes, if due.
Source: Times Property in The Times of India, Bangalore
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