Real Estate- a Good Investment

THE REAL ESTATE SECTOR HAS COME A LONG WAY IN THE PAST DECADE SCORING OVER OTHER FORMS OF INVESTMENTS

Times of India, Chennai, 20-Jan-12

For an industry that is rapidly evolving and energetically meeting the challenges of the future, 13 years is a short time indeed. During this period, however, India's real estate sector has metamorphosed beyond recognition. Even a decade ago there was little or no property market to speak of; choices for home buyers were limited, builders were generally considered - sometimes with very good reason - as being untrustworthy; and the boom in housing and home finance had yet to happen.

Shortly thereafter, the market saw a stunning recovery. As Lalit Kumar Jain, President of CREDAI, the national body of developers observes: "The evolution of the Indian real estate sector has been phenomenal since 2000, propelled by a growing economy, liberalised foreign direct investment policy and the higher yields the sector's offering. The Information Technology boom also had a huge impact on the real estate sector." Jain is confident that over the next few years, the sector will grow at the rate of 25 percent.

While other forms of investments like gold, mutual funds and shares have shown severe fluctuations, the real estate has managed to remain steady especially in a city like Chennai where the conservative nature of the buyers has helped keep the market steady. Most developers agree that real estate has been a safe bet especially over the past decade with returns from investments in the sector yielding higher rates.

President, CREDAI, Tamil Nadu chapter, and Chairman of Akshaya Homes Chitty Babu couldn't agree more. He feels when it comes to buying property, anytime is the right time. "If you are prudent and take the right decisions, investment in real estate is the wisest thing to do. I have never heard of prices of land, apartments or commercial space coming down as compared to other forms of investments. You are assured of minimum returns. So if someone is looking at real estate as an investment, they have to do it today," he says. Delay in taking a decision could result in prices going up and making it all the more tougher to buy property.

Experts say the results are there for everyone to see. Gold prices have been quite unpredictable and the stock market has been quite volatile. It is only the real estate sector in the country that has seen steady growth, they say.

But it is common to find most people delaying taking a decision due to financial problems. Rajesh and Priya, who got married five years ago, have been planning to buy an apartment from the time they got married. But they are yet to move forward from the planning stage. Though both of them are employed, they were unsure of taking on a huge financial commitment. But with property prices rising, they regret the delay. According to Rajesh "We kept planning to buy a house on GST Road. I wish we had bought a house five years ago. With banks willing to offer home loans it wouldn't have been difficult for us to buy an apartment. Prices in that area have doubled now making it tougher to buy a big house."

"The India shining story with sustained Gross Domestic Product (GDP) of more than 7.5 per cent in the last few years and burgeoning middle-class has thrown up a new set of buyers whose aspirations for good living is matched by their ability to pay for the conveniences," says Boman Irani, CMD, Rustomjee Group. Indian real estate is being perceived as a better bet for long-term future investments, he adds.

Says Kalyan Jayprakash, Director, Inno GeoCity, "Investment in real estate is asset-backed in Chennai and the market has seen very few speculators. Most buyers are end users and as a result, the market has seen very few fluctuations. There has hardly been any volatility. People in Chennai are conservative by nature and a lot of thought goes into buying property. This is the inherent strength of the market. But it is important not to over stretch yourselves. If you plan according to your financial capability there is no reason for you to make a mistake," he says.

Though globally, a downturn seems to be hovering on the horizon, in a country like India that is witnessing rapid urbanisation, the outlook is good. As internal demand rises, and despite the squeeze on affordability in current times, aggregate home loans by commercial banks reportedly rose 21% to 3,64,170 crore as of end August 2011 from 3,00,929 crore in March 2010, with much of the growth in bank credit this year driven by home loans. Cushman and Wakefield and Global Real Estate Institute in a report released this October say that housing demand is estimated to be over two million units across the next five years in major cities including Chennai. Anurag Mathur, Managing Director, Cushman & Wakefield, India says, "The present economic situation may be viewed as a transitory point for the real estate dynamics in India. The long-term perspective suggests that the sector will continue to witness demand." According to Suresh Jain, MD, Vijayshanthi Builders, "Investing in real estate has a number of benefits and as land always appreciates in value it is a safer option. Be it investing in land, an apartment or a commercial property, each form has its own advantage. Real estate is safe, easily disposable and you are also entitled for a loan. In the case of other forms of investment such as gold, bonds etc, you cannot pay off the amount by taking a loan. A city's population and land prices have a direct correlation and this is beneficial for those who choose to invest in real estate." With so much potential waiting to be unleashed in the real estate sector, industry representatives are optimistic. Now that the real estate sector is gearing up, the government needs to wake up too. As real estate developers would agree, there is simply no time to waste.

O PROPERTY IN THE PREMIUM SECTION WITNESSED A HIKE UP TO 16 PER CENT IN CAPITAL VALUES ACROSS THE CITY DURING THE OCT-DEC 2010 PERIOD COMPARED TO THE JULSEP 2010 PERIOD.

LOCALITIES SUCH AS MANAPAKKAM, VELACHERY, ADYAR, MEDAVAKKAM,T NAGAR, NUNGAMBAKKAM, KAZPIPATHUR, PALLIKARANAI AND SEMMENJERI WITNESSED MAXIMUM APPRECIATION OF 16 PER CENT IN PREMIUM APARTMENT CATEGORY DURING THE PERIOD.