What Makes A Real Estate Investment Location Lucrative?

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

A simple Google search on real estate investment locations will throw up hundreds of results. Finding genuine online advice – the kind that can lead you to a truly lucrative real estate investment decision – is like finding the proverbial needle in the haystack.

The Internet’s usefulness as a tool to guide your property investment decisions depends upon the individual’s capacity to read between the lines of a mammoth amount of information which may or may not lead to house one is looking for.

Year 2017 should be a year for residential real estate investment, as the Government is ensuring low interest rates and a slew of incentives via schemes such as the Prime Minister’s Awas Yojana (PMAY).

So, interest in and appetite for real estate investment is back in force – but where should one invest? After all, successful real estate investment is proverbially driven by ‘location, location, location.’

When you are trying to identify the right location to invest in, you are obviously ready to put up a lot of saved or leveraged capital. This is no time to rely on sponsored advice and blanket generalizations.

What must come into play here is some basic knowledge of what makes the real estate market tick, and more specifically what drives demand in any location. The viability of a location is what will result in the hoped-for returns on investment.

So, how does real estate location viability actually work? From a residential property investment perspective, every city – especially if it is a tier 1 city – has its hot investment corridors, and other micro-markets which are simply not working currently.

Some of the important real estate drivers to look for are employment generation, infrastructure creation and historic price growth.

Mumbai, being the country’s financial capital, has been attracting massive investments over the years despite its astronomically high ticket sizes.

Bangalore has become India’s prominent Information Technology capital and been attracting consummate investments.

However, Pune has begun stealing Bangalore’s thunder as a preferred InfoTech destination, owing to:

  • Better real estate affordability
  • Global reputation for Business Process Outsourcing (BPO) services, and
  • Massive wealth of trained workforce.

The third factor is a very important one, and plays a big role in the city’s viability as a real estate investment destination.

Pune Mumbai Bengaluru

Pune – the veritable ‘Oxford of the East’ – has numerous high-quality educational institutes which regularly churn out graduates who are directly absorbed not only into the city’s IT firms but also into its manufacturing belt and services sector.

This directly translates into housing demand across a broad budget band, and in various locations of the city.

All such cities have micro-markets which are suitable for either commercial or residential investment, and others that are probably avoidable right now.

Because of the amount of business Mumbai, Bangalore and Pune generate – and the fact that they are in the cross-sights of many large commercial players – these cities are excellent choices for commercial space investments as long as:

  • One picks one’s location and property size wisely
  • Achieves a reasonable entry point in terms of ticket size

Commercial real estate investment calls for larger capital and longer investment horizons, and ROI is generally derived from rental income.

Areas which are close to relatively affordable residential catchments or at least provide good connectivity to them should be favoured.

When it comes to residential real estate investment, it pays to remember that speculative investments may have played a role in escalating prices beyond affordability in some areas.

Several factors have now combined to drive out speculators from most Indian cities, and price corrections have occurred. If the prices have bottomed out or the location is still in growth mode, it is a good time to invest in it.

One should look for factors like proximity to workplace hubs, infrastructure availability – especially in terms of connectivity and public transport – and a decent saturation of social infrastructure such as shopping outlets, healthcare and schools.

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.

Nasik Real Estate: High Investment Potential

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

Nasik has been developing rapidly over last fifteen years. This city’s multiple economic drivers include its proximity to Mumbai and its strategic location on the Central Railway main line and the Mumbai-Agra National Highway. Nasik is now a new centre of industries, commerce, administration, education, production and marketing.

Basically, Nasik has a four-fold economic configuration – pilgrimage economy, industrial economy, defense sector economy and a strong agricultural economy. In terms of industry, Nasik has three well-developed industrial estates at Satpur, Ambad and Sinnar.

The important industries situated in Nasik and its surroundings include ABB India, Mahindra and Mahindra, Gabriel, Glaxo SmithKline, LG Electronics, Samsonite, Garware, Siemens, Blow Plast, Thyssen Krupp, Ceat, Atlas Copco and TI Cycles.

Real estate development in Nasik has been taking place in a very collaborative manner. In many cases, landlords with sizable agricultural land holdings on Nasik’s fringe areas have either sold their land or entered into joint venture agreements with developers and moved farther for their agriculture activity, thus infusing land as well as capital into Nasik’s real estate market.

Residential projects such as Amit Eka by Amit Enterprises Housing Ltd. in the Pathardi area of South Nasik have been meeting with enthusiastic response, both locally and from out-station investors who find the property rates in Mumbai and Pune beyond their budgets. The areas along Pathardi Link Road are major developing residential destinations that see high demand by second home buyers.

Nasik - Shoot with Eka Flat holders
Nasik – Shoot with Eka Flat holders

Overall, Nasik offers very encouraging fundamentals for real estate investors. Some of the advantages it enjoys over other several major cities in Maharashtra include:

• Well-developed physical infrastructure
• Adequate and good quality water supply
• Located at one vertex of the major growth triangle of Mumbai, Pune and Nasik
• Comparatively lower environmental pollution
• Efficient intra and intercity commuting facilities
• Excellent connection with other regional growth centres
• Developed industrial estates such as Ozar, Sinnar, Satpur and Ambad in the immediate vicinity
• The Software Technology Park at Ambad
• Salubrious year-round climate
• A well-established Defense Base that gives Nasik a safe and secure social environment and also interactive national positioning with other Indian cities
• Air connectivity with national cities
• Generous and increasing availability of skilled labour
• Numerous high-grade healthcare facilities and educational institutions, also for higher and professional education

Nasik’s future in terms of investments and economic growth is very promising, thanks to several projects underway or expected to confirm operations in Nasik in the near future. For instance, Hindustan Aeronautics has short-listed Nasik as the base for its Rs. 23000-crore manufacturing plant for Sukhoi jets for the Indian Air Force.

Also, the IT/ITES sector in Nasik is rapidly becoming a force to reckon with. BPOs have begun recognizing Nasik as a very viable destination because of the lower real estate costs while at the same time being a very good catchment of educated, English-speaking talent. Several information technology companies are now firming up their plans for establishing bases in Nasik.

Shoot with Eka flat holders
Shoot with Eka flat holders

Private banks have been major drivers for commercial real estate in Nasik, with ICICI, HDFC and HSBC having expanded their operations phenomenally. Moreover, the Government of Maharashtra is investing heavily into the already thriving Wine Parks industry in Nasik, which is already famous for Sula Vineyard.

The general real estate trend in Nasik has been accelerating growth even in while turbulent economic conditions slowed down the markets in most other cities. This is amply borne out by the steady rise in construction and development activities.

Developers in the city are displaying remarkable vision, having taken Mumbai, Ahmedabad, Surat, Pune and Bangalore as development models, replicating what works in these cities and conscientiously steering clear of what does not.

All these factors are boosting employment and prosperity in Nasik, which directly influences the demand for residential real estate. Little wonder, then, that more and more investors are now focusing on this city. They are attracted by the low property rates and excellent mid and long-term demand projections.

How To Succeed In Property Investment

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

Getting into real estate investment without a proper understanding of what you aim to achieve is not advisable. There are many risks involved in real estate investment. However, with the right data and advice, you can definitely succeed in property investment. Here are the general guidelines:

To begin, you should know what the odds are. The fact is that the chances for inexperienced property investors to either succeed or lose a lot of money are more or less evenly balanced. The likelihood of suffering a loss is greater if the investor does not have a good idea of the state of the local property market.

Before investing in property, make sure that you have enough insurance. Many investors who have succeeded in the property arena safeguard their investments by floating a nominal limited liability company for their activities. This is certainly an option, but not really a necessity unless you are playing for very high stakes and investing in multiple properties.

Advice to End-User Investors

Property investors actually fall into two broad categories: end users and pure investors. That’s right – even end users can technically be described as investors in some cases. These individuals seek to make a percentage of profit on properties that they are themselves occupying.

This may involve partial rental or sale of a home or office, retail or factory space. This is not a very common practice, and is usually seen only in cases where the part of the property being rented out or sold would otherwise remain idle and non-productive.

A more rewarding option is the sale of the entire property. This is sometimes done for reasons other than investment – the seller may be seeking larger or more luxurious premises, may be in the process of relocation, or may not be satisfied with the property for other reasons.

There may also be a need to downgrade on certain expenses such as maintenance costs. If the sale of such a property is need-based, the profitability usually reduces since the seller needs to cash in within a limited period.

The kind of profit an end user can make on the sale of a property depends on the age and state of the property, its location and its inherent value on the market. A residence purchased five or ten years ago will have appreciated in value for the simple reason that property rates are constantly increasing. The value of the property will be even higher if the location is one in high demand.

The price a ‘second-hand’ property will fetch will also depend on whether or not it is well maintained, the facilities it offers, the area it is located in, etc.

Advice to Pure Investors

Exclusive or pure investors buy property for the exclusive purpose of earning a profit on them; they do not utilize the estate personally. The properties in question can be residential (flats, bungalows, row houses, duplexes, etc.), commercial properties (offices, factory sheds, etc.), retail (e.g. mall space) and non-developed or partially developed land.

Pure investors have a better chance of making a profit in their dealings simply because their options are wider. There is also no immediacy or urgency involved, since the basic objective is profit.

property investment

Investors of this kind should keep certain guidelines in mind:

• Location is everything. Even if rates are steeper in a preferred area, go for it. It will pay rich dividends in the final analysis.

• It is always more profitable to invest in properties under construction or still in the planning stage. By the date of actual completion, rates will tend to be higher.

• If one chooses to invest in residential real estate, the first preference should be towards flats that are located on the upper floors. They should offer a good view and ventilation. Other amenities in the schemes also matter like, the use of a swimming pool, clubhouse and other trendy facilities. They should also be backed by adequate parking facilities. Most buyers do not make compromises on this last factor, even if they give consideration to the others.

• Choose to invest in properties by reputable developers. The very name of a famous builder makes a definite difference on the bottom-line of the sales deed.

A quick note on ready for possession properties. Certain dynamics of the property market remain constant, so a profit is still possible. However, a ‘readymade’ property bought for the purpose of investment will have to be given sufficient time to appreciate in value.

Also, certain modifications specific to a potential customer’s needs may have to be made. The cost that this involves would have to be adjusted in the final amount.

Finally, if you are new at property investment and are utilizing a housing/investment loan in order to invest in property, ensure that the ratio of self-finance-to-loan amount is conducive to a future profit. Double-check all legal documents.

Property investment is not a game of blind man’s bluff. Fortunes can be lost for many reasons – spurious documentation, faulty judgment, market crashes and other unforeseen circumstances. There are a number of bases that need to be covered to reduce the risk factor.

Image courtesy of twobee / FreeDigitalPhotos.net