At What Age Should You Invest in Real Estate?

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

In India, the current mantra is that property investment is ideal only for upcoming or established career makers – but is this true?

How do banks, lenders and the property sector at large view investors who do not fall in that age bracket anymore?

Can one be too old to put money into property, and would one have missed the chance to grow their wealth through real estate at some point?

Of course, it is true that banks are willing to lend to a person only for so long; when a prospective borrower is looking at retirement in the near future, the concept of giving them a long-term home loan understandably does not make much sense to them.

Let us examine this a little more closely.

When a person is in his or her 30s, they have around 30 years of active professional life ahead of them. Naturally, this gives them abundant time to develop a large property portfolio.

However, even when they are in their 40s, they are far from too old to successfully invest in property. There are still as much as 20 years ahead as an income-generating citizen – and even more if one is successfully self-employed or runs a business.

In other words, there is still plenty of time ahead to make some profitable property investment choices even in one’s 40s.

Of course, it goes without saying that the sooner one invests, the higher will be the ultimate gains because profits from property compound over time.

Home Buyers

Generally, it is assumed that one must have the ability to service home loans for 25 to 30 years to finance one’s property portfolio. However, many banks in India have now understood that people can and do work past the conventional ‘retirement age’ of 65 these days.

Interestingly, once one has secured a good portfolio of assets, one has additional clout and credibility with banks since these properties can act as collateral for fresh loans even at age 50 or above.

Definitely, the time to experiment with ‘speculative’ investment should be over by this time, as one should justifiably have a healthy aversion to risk by age 55.

By this age, the ideal strategy should be to boost the value of one’s existing assets via proven value-boosting routes such as renovations.

Without a doubt, a person who wants to keep investing in property in India at age 60 or above needs to have a very clear understanding of the market, as well as a great deal of confidence in one’s personal finances.

As already explained, it is now technically possible – under certain circumstances – to raise a home loan for property investment even after retirement.

The question whether one would want to is, of course, a personal one and would depend on a variety of circumstances – most related to one’s financial soundness and appetite for such activities.

So far, so good – but what about buying a home for personal use? This is where it gets a lot simpler because there is no ‘ideal’ age for home ownership.

If one has been living in rented homes all one’s life, buying a home even at 65 makes perfect sense. In the first place, it is the perfect retirement gambit, as it provides freedom from the recurring expense of monthly rent.

Secondly, it secures a sound asset which gives unmatched financial security and can be used to raise funds in emergencies. Thirdly, a property is the perfect bequest to leave behind for one’s children.

The bottom line is that there is definitely such a thing as an ‘ideal age bracket’ for property investment – though this age bracket is flexible depending on various factors.

However, there is no ‘ideal age’ to buy a home for personal use. The latter fact is especially true if one sees a self-owned home more as an abode and sanctuary of financial freedom and security than an investment instrument.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Focus Areas for Tackling Pune’s Urbanization Challenges

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Pune – one of the fastest- growing cities in India – is the seventh-largest metropolitan city of India, and the second-largest in Maharashtra.

Over the years, it has attained unprecedented momentum and dynamism on the back of its popularity both as an academic center and a business hub, with Information Technology having become the predominant industry driving its economy, job creation and real estate demand.

It goes without saying that Pune’s growth story is not a temporary phenomenon. The city will expand exponentially in the years to come, both geographically and economically. This will bring its own challenges with it, many of which are already manifest today.

To understand the challenges that urbanization poses to a city, one needs to examine the proportion of population and existing lack of social and physical infrastructure required to cater to the needs of this population.

Obviously, the areas where lack is evident will pose increasingly bigger problems if we assume that population growth is assured and inevitable.

Without a doubt, the city planning authorities are not blind to this. The massive influx of inward migrating population into Pune has catalyzed a major rush for infrastructure up-gradation on all fronts.

We are seeing a lot of efforts being put in to optimize road connectivity, parking facilities, public transport, electricity, waste management, water supply and land planning. Nevertheless, there is a need for increased pace and momentum.

The city is looking forward to the new regime to take urgent real-time steps to ensure that its citizens are not deprived of basic services. Some of the areas that need to be focused on are:

Traffic and transportation:

  • Use of advanced urban street designing for better roads, subways, walkways, overbridges and flyovers
  • Develop better public transport which can reduce usage of individual vehicles (there are 46 lakh vehicles on Pune’s roads every day)
  • Encourage carpooling and bike pooling initiatives. Encourage cycle-to-work concept, develop better accessible cycle tracks and discourage encroachment by motor traffic
  • Focus on Metro, which will significantly reduce the daily travel time for commuters
  • Address the mounting parking issues with more creative cost to parking in major areas, mechanized stacked parking facilities, etc.

Water supply management

Pune’s water supply – and its management – needs to be focused on priority. It has been estimated that about 30% of water is lost in distribution, the main causes being heavy leakages and imprudent household use.

The Government should encourage the use of water cards as already being seen in areas like Nanded, and similar progressive initiatives.

Solid waste and storm water management

  • Develop enough facilities to collect solid waste
  • Increase civic education on waste segregation and improve efficiency of garbage collection
  • Create organic compost systems which can be used for agricultural lands in nearby areas as fertilizer
  • Improve channelizing of drainage systems and storm water drains which released into mass water bodies. The city has only 44% tertiary drains, and the primary and secondary drains are increasingly obstructed by silt. The municipal authorities need to get more proactive on cleaning these drains regularly

Sewerage and waste water treatment

All developed and developing areas should have access to underground drains (UGDs). Pune’s existing sewerage treatment capacity is not efficient, and a large volume of untreated water is released into its rivers.

The Mula–Mutha rivers are polluted, as untreated domestic waste is being discharged into them. Likewise, Khadakwala Lake has also been polluted. Addressing these issues must become high-importance focus areas.

640px-New-Yerwada-Bridge-Over-Mula-Mutha

Sharp focus on housing

  • Encourage the development of more integrated townships with walk-to-work options
  • Encourage housing with open spaces for children and for Senior citizens
  • Create more affordable value homes / low-cost housing and SRA schemes to help curb slums proliferation in the city
  • Increase the pace of project completions via proactive policies to boost the availability of ready-to-move homes where they are needed the most. Given the massive increase in job opportunities in Pune, the supply of affordable, completed housing projects is insufficient when compared to under-construction projects
  • Step up infrastructure creation in the fringe areas with low real estate rates to encourage migration to these areas, and also develop commercial development of these areas to give them economic strength
  • Formulate and implement better zoning for commercial and residential usage
  • Encourage sustainable real estate practices such as mandatory use of solar panels, rainwater harvesting, etc. in new residential projects, and in older projects wherever and to the extent feasible

Modernize public safety

  • Encourage smart transportation with real-time tracking to ensure timely response to emergency situations. This includes geographically integrated systems for identifying caller location
  • Increase public safety with better city surveillance systems and video analytics

While Pune’s inclusion in the Smart City program will doubtlessly address some of these areas, the benefits will not be uniform across all of the city’s ever-expanding boundaries.

The vision of our city planning authorities must be all-encompassing and democratic to all regions. In particular, more attention needs to be given to the much-neglected gaothan areas which have not yet been included within the municipal limits because of various reasons.

In short, Pune must become a uniformly modern city, capable of handling urbanization growth – both now and in the future.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Image By Rsrikanth05Own work, CC BY-SA 4.0, Link

How Does Job Creation Lead To Demand For Homes?

Kishor Pate 2Kishor Pate, CMD – Amit Enterprises Housing Ltd.

Among the key variables that generate interest from property investors in any given location or city is job creation.

An area in which several businesses are generating career opportunities for people becomes a magnet for demand from homebuyers. Such areas also become the focal point of interest for residential property builders.

Employees of these firms will always hope to find homes close to where they work. Home prices in such areas can be very attractive if it is still developing – as long as it provides good access to a office hub, it will attract a lot of demand.

Apart from end-users, investors will also be interested in buying up residential properties and putting them out on rent.

In any case, since a substantial number of families may decide to purchase their houses there, developers will line up to buy available land parcels and build residential projects.

Residential property builders put in a lot of research before launching a project in any new area. One of the main factors they will focus on is what kind of demand is likely to exist.

For instance, an area near an industrial area or BPO will definitely see a lot of demand from budget home seekers, while a location around a software development firm is likely to generate demand for mid-income and semi-luxury homes.

Baner_from_Baner_Pashan_Biodiversity_Park

If a new office hub is generating highly-paid jobs, it becomes a suitable target for luxury home projects as well. However, many developers tend to miscalculate an area’s potential to sustain demand for luxury offerings.

Also, the Information Technology-driven job market a lot more fickle than that of, say, the manufacturing industry. Industrial jobs in India are largely driven by local demand for manufactured goods, so careers in a manufacturing company can be quite steady even if the salaries are not spectacular.

Infotech jobs, on the other hand, are not as predictable as they may have initially seemed. The demand for such services in India is primarily driven by companies in the United States, where policies regarding outsourcing to other countries can have a big impact.

We are currently witnessing such policy fluctuations happening in the US, causing a lot of uncertainty to software companies here in India.

Not all job categories in the IT/ITeS sector are affected equally, but developers of residential properties looking at cashing in on IT-driven housing demand must nevertheless be attuned to which level of housing demand is sustainable, and which is subject to sudden change.

Investors must also be able to gauge where Infotech-driven residential demand is headed. For instance, the previous IT capital of Bangalore is now rapidly yielding its market share to cities like Pune, which are attracting more and more IT companies with their burgeoning workforces and cost-effective property rates.

About The Author

Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd. is the driving force behind one of the most successful real estate development firms in Pune and beyond. Apart from its signature luxury projects like Montecito in Sahakar Nagar and other premium gated townships, AEHL has also launched highly successful affordable housing projects like Astonia Classic and Colori in Undri and the Mediterranean-style township Astonia Royale in Ambegaon.

Image source: Wikimedia