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Indian Real Estate News : Kolkata
Zooming in - Working it out wisely
Source: The Times of India Sep 13, 2016
Investors are keen on both, rental returns and sale proceeds. Here's what will help you read the market better.

If you are a property investor, who is looking for regular rental returns, look at an investment in a highly demanded locality. However, if you are looking for growth in leveraged value so that you can make profit after a few years, look at a locality that promises you price growth. In many cases you would want both.

Latest data indicates that areas that are high in demand also have considerable supply. However, you may have been missing out on localities that are high on growth. Here's what will help you read the market right.

Those looking for regular rental returns include long-run end-users, who are keen on leasing their house for some time now with the intention of returning back later. For example, NRIs or even those who have two homes in the city but choose one over the other for reasons such as proximity to their workplaces or schools etc. Pure investors, who look for a big return at exit, are usually the business class settled in the city.

If you are an investor, who is looking for steady rental returns in Pune, look at Pimpri-Chinchwad, Wakad and Kharadi, which top the chart in rental demands. As these places also have a big demand for sale, you may not be able to negotiate on the listed values. However, these localities also have a large supply and you have a large number of properties to choose from. Price usually plays a big role while short listing properties. Capital values from 2011 through mid-2016 has seen comparable appreciation and therefore, zeroing in on any one of these localities based on values becomes difficult.

Therefore look at the other advantages of these locations. Pimpri-Chinchwad is also the most searched locality online, thanks to the efficiency of the Pimpri Chinchwad Municipal Corporation (PCMC), its proximity to the Hinjewadi IT Park and the IT facility at the Maharashtra Industrial Development Corporation (MIDC). It also helps that the pricing is within Rs 3,430-Rs 8,070 per sq ft range.

Wakad has a locational advantage. The spill over population from Baner, an aspiration residential hub, also worked to the benefit of this locality. Kharadi attracts young professionals in their 30s, normally employed as IT or financial analysts or in the media or doing their own business. As a large part of this workforce is not yet ready to buy and are mobile between cities, hence, they look for rental properties to stay near their workplace. You are likely to get rental returns of a healthy three percent. (See chart attached) Take the case of Rakshit Kaushal, an analyst with a Fintech start-up. Kharadi was a clear choice. Being a start-up and therefore not a very formal work environment, I was looking for a place where clients could be met in premium coffee shops, vendors could be sourced in the vicinity and I could work close to my residence. In case I needed to rush out, I made sure I was close to the office," he says.

While looking for a property, he chose to buy from developers who offered quality construction and had a proven track record. "There is a lot of supply which gives me as a buyer a good reason to negotiate," he adds. But he also played on the intense competition among developers to focus on quality at the right price.

This strategy works even if you are an investor looking to buy in these areas. Since prices have already gone up to Rs 6,000 per sq ft levels you are essentially buying for steady rental returns and hoping for a future growth as the locality attains a premium statute.

However, for another class of investors like DS Lakshmi, today's values need to be significantly lower, so that future sale proceeds give better returns. She opted for Bavdhan, a weekend home destination in 2008. Easily accessible from Pune and Mumbai, it also has the advantage of being at a close distance from business districts and IT zones of Hinjewadi, Magarpatta, Viman Nagar and JM Road, all within 30-minutes' drive. "It is a popular area among the mid-senior level management professionals. Since the neighbourhood is young, there are hangout options and the traffic is not too bad either," says Lakshmi who has leased her property in Bavdhan. She is already getting three percent returns. Property values too have appreciated by about 11 percent till now.

Similar localities like Pimple-Saudagar and Shivaji Nagar have recorded price growth of nine to sixteen percent, over the past three months. This despite a slump in property markets across the country. Those who purchased into these markets even a year ago would have benefited from this improvement in sentiments.

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