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right move: Property investments come in many different forms, choose one that suits you best |
It's only a matter of time till you reap handsome rewards for buying that 2BHK or a small shop at an upcoming locality. But there are few points you should keep in mind before investing in residential homes, commercial spaces or vacant plots of land.
A few guidelines that can help you arrive at a decision:
Residential properties
Many people consider buying a second home, one that can be rented out or sold at a higher price at a later date. Residential properties are by and large the most popular form of investment.
What's hot: Think about the demand for homes in Mumbai. You can be 99 per cent sure that your second home will get sold off at a much higher value.
What to consider: The reputation of the builder, the quality of the project and the location. This will help determine the rate of appreciation in the coming years.
Who should invest: "Salaried people prefer to invest in a second home as they can't afford to buy land or commercial spaces easily. Moreover, the tax exemption on the principal and interest amount of the home loan is a big incentive to invest in residential space," says Ashok Kumar, principal and managing director, CresaPartners, corporate real estate service providers.
Purpose: You can rent it out to a family or commercial establishment, say a coaching class, or get it converted into a service apartment that can be rented to MNCs.
Commercial properties
Investing in commercial properties would mean buying a small office space or shops. As a rule, commercial spaces fetch better rentals than residential properties. However, always remember that when the real estate falls, the commercial properties are always the first to be hit.
What's hot: "If you want a property to create a fixed source of income for you, then it's best to invest in a commercial property," suggests Jayant Gehi of Mayfair Housing.
What to consider: "Besides the location and reputation of the builder, consider the kind of offices that are going to come up in a particular complex, as it can influence the appreciation rate," says Ali Lokhandwala, director, Lokhandwala Builders. "Though people hesitate to buy commercial spaces fearing the high interest rates, it's not a bad idea to buy a property if you are sure that it will get high returns that offset the interest rates," adds Lokhandwala.
Who should invest: "If someone is planning to invest in a commercial property, s/he should have at least 50 per cent of the funds in hand. There are no tax exemptions on buying commercial property and the rate of interest on loans is as high as 15-16 per cent. And in these times of inflation, banks aren't willing to dole out loans on commercial spaces easily," informs Kumar.
Purpose: You can buy commercial space to start a small office or business or rent it out as a shop or office that will fetch you regular rentals.
Land
Today, people who invest in land on the outskirts of Mumbai want to develop weekend homes there or keep it just for reselling. As land is frightfully expensive, many people find it beyond their affordability. Also, buying land involves a lot of paperwork.
What's hot: You can develop it the way you want to. Moreover, such areas are seeing a rapid appreciation in rates.
What to consider: Make sure that the particular area has some basic infrastructure like roads, station, electricity and water supply. Considering the development in the peripherals of Mumbai, it is just a matter of time before such areas are touted as 'upcoming'.
Who should invest: A person with a substantial amount of savings can invest in land. Someone who can easily borrow from friends or family can also buy land, as s/he will be saved from the burden of home loan and corresponding interest. But upper middle class people can buy small plots or weekend homes. Banks are willing to give home loans for building weekend homes or buying small plots of land.
Purpose: You can keep it for sale in the future or develop it into a weekend home. Creative people can also make a studio out there.
