The year 2011 witnessed significant developments that impacted the Indian economy. Rising interest rates, global uncertainties, declining foreign investments, dip in GDP, et al. The real estate sector is by no means an exception especially with limited access to funds by developers, increasing debt burden and PE funds’ higher expectations for investment.
In the fast changing scenario, real estate investors are invariably faced with a dilemma as where to put their money to get maximum yield. Investment in plotted development is a better option for those who do not need housing in the coming years as price appreciation will serve as an hedge against inflation.
A number of layout projects in North Bangalore in the price range of Rs 1,000 to Rs 3,000 per sq ft with plot loan options may be considered for medium to long term investment, according to property consultants. Further improved level of connectivity in electronic city, Bididi and Mysore road offers potential avenues for investment in plotted development projects. Yet another area is Hosur road where industrial development is picking up and a number of plotted development projects are under various stage of implementation.
Investment options in residential property in and around the city abound but the yield varies from 4 per cent and above depending on the location, specification, type of development and amenities offered in the project. Though the yield is considered low, capital appreciation and fiscal sops compensate investors to a little extent, say realtors. There are others who feel that investors should look at other options like row houses, town houses and villas as they accompany with more land areas that enhance the overall return on investment.
“While multiple options are available for investment in apartments, they are limited in specific projects like villas, town houses and row houses. Moreover, they are coming up with land area along with the built up area where the overall return on investment would be substantial for investors”, says Hemang Rawal, Managing Director, Samruddhi group.
According to industry experts, prelaunch options in residential projects provide yet another medium term option where the yield ranges from 18 to 25 per cent but here again it is limited to select projects depending on the developers. Industry experts caution that investors should confine such investment commitments to developers with a consistent track record, capability to adhere to project delivery schedule and financial back-up.
While a majority of investors are invariably looking at North and East Bangalore for real estate investment options, untapped potential exists in West Bangalore with proximity to city areas, feel property consultants. The upcoming mall project with multiplex and retailing on Mysore road provide investment avenues in residential and commercial properties.
On the commercial property front, there are limited options for investors. Primarily these options are unaffordable for small time investors as the minimum threshold limit is said to be Rs 2 crore, according to industry sources.
On the office market, there is limited availability of Grade A office space. Companies are looking at committing space for future requirements in buildings that will be ready in the next 9-18 months. Tenants are also committing space in buildings that are under construction or BTS option.
There is limited opportunity for retail investors in commercial property as developers themselves wish to hold onto the units as of now. “Today tenants are ensuring that when they enter into buildings there are no multiple owners of smaller size units per floor”, feels Ram T Chandnani, Deputy Managing Director, South India, CB Richard Ellis. Blue chip tenants do not prefer buildings strata ownership, as a result commercial property transactions are now seeing a trend where developers are only selling the whole building or prefer at least one investor per floor. This leaves limited scope for retail/smaller investors who want to invest in commercial property.
Wow, so chic. How much did it cost you?
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