Are you looking to invest in real estate in India? There are some very important and logical criteria which one should consider while looking to invest in property in India, especially the city of investment. It is very easy to get swayed by glossy brochures, big banner advertisements, TV commercials, brand ambassadors etc. Need to understand as an investor that we end up paying for all this; the cost of property includes the marketing expenditure, irrespective of quality of the property. Let’s for now concentrate on residential property in India (as the criteria vary for a commercial property) and look at some of the important facets which should be analysed before the physical investment.
Real Estate Profiling a City
As a real estate investor one should learn the art of real estate profiling of a city, it is ‘the’ most important aspect, which helps generate the big picture. The aspects which need consideration are the economic profile of the city, its contribution towards the state GDP; industrial infrastructure and job opportunity profile; social and religious stability; political profile and stability; weather and natural calamity index.
What percentage is the End User Market?
Before investing in property in any city in India, it is very important to analyse the end user profile of the city. Every city has its own real estate peculiarities in India. It needs to be understood that the residential real estate is dependent on demand and if end user demand is not there in a particular city, that residential property market is going to suffer or fail in the long run. Secondly, as an investor one needs to appreciate the segment profile of a locality for investment; whether it is an affordable, mid-segment or luxury property based area. For example, it doesn’t make sense to buy a luxury property in Borivilli, Mumbai, as the area is known for affordable housing.
The Political Profile- Real Estate Impact
Whether we like it or not, real estate in India is directly linked to politics. All political families or parivaars, own large packets of land across states and cities. The infrastructure development alongwith corporate money (they are to please their political masters) is going to flow as per the political profile of the state. One also needs to understand that this profiling more often than not changes after every 5 years with elections. As a testimony the Master Plan (which is supposed to look at futuristic planning) of Gurgaon has been re worked out 3 times in last 10 years.
As an investor one needs to be very careful and identify ‘safe investment pockets’ in a city from the real estate perspective, especially in the newly developing areas. There are always neutral areas in any city, which do not get affected by the political switchover. Reliable local brokers are the best source for such information. We have enough examples of this facet in Gurgaon, the so called millennium city.
Real Estate Index
There are any number of property and real estate indexes in India, being circulated by private companies, however these can be biased, based on specific interests. The best is to follow RBI (Reserve Bank of India) and NHB (National Housing Bank) indexes, both of which are based on proprietary algorithms and cover the entire spectrum of real estate, with a reasonable sample size. These indexes give a fair real estate profile of any city in India.
One of the most important factors which effects the growth of real estate is the planning and progress of infrastructural developments in that city or locality. Infrastructure in terms of roads; highways; industry; services to include – education, hospitals etc.; transport systems; master plan; housing; airport etc.
The above are just broad heads which need to be considered before indulging in purchase of residential real estate or property in India. It needs much more detailed analysis and due diligence before arriving at the final decision of which property to purchase and in which city.