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.

Why Real Estate Investment Beats The Stock Market

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

The stock market has always played the role of a barometer to the economic mood of a nation. Real estate is one of the prime elements in the latter context.

In fact, an interesting and important relationship exists between real estate investments and the stock index. While both offer a profitable investment opportunity, both also carry risks that complement each other.

A common belief has been that the profit margins associated with stock investment has been higher when compared to alternative asset investments. Stocks are liquid and flexible, whereas real estate is not. Also, stocks offer growth rates that real estate investment can rarely match.

Lastly, stocks are also easier to acquire and operate than buying a property as investment. Investment property also includes several added elements like insurance, maintenance, taxes, legal fees, broker commissions, etc.

It has also been observed that dramatic movements in the global stock market will throw up salient differences between real estate and equity investment. The strength and weakness of the global economy appears to influence both real estate and stock prices.

According to the CXO Financial Advisory Group based in U.S., real estate and stocks are negatively correlated. After the great recession, the stock market lost about 60% of its value. With loans getting cheaper, people now invested more in real estate, since it promises guaranteed returns in the future.

property investmentA crucial point to note here is that while stock prices can rise and fall, real estate investment almost always brings in more profits. In fact, the allocation towards real estate in most investors’ portfolios has steadily risen since the Global Financial Crisis. This is because investors seek to take advantage of the low correlation between the asset class and equity market.

We already know that volatility is always caused by the monetary and fiscal policies of governments, and this has effectively increased the focus on real estate investments. Rising inflation has the same kind of effect on both investments. Increased inflation lowers the currency value, and in turn drives up the price of assets – real estate very prominent among the asset classes.

The outcome of stock market volatility is more evident if one follows the changes in real estate markets. Real estate investment provides more stability and can also deliver a continuous income stream, and this is why it attracts more investors. The slow but steady correlation between the stock markets and real estate markets provides the important advantage of diversification in an investor’s portfolio.

Also, investors can be more confident of constant returns, since the real estate market is relatively immune from both short and long-term price swings. Stocks, on the other hand, are subject to constantly changing prices, and investors can be placed in really tough situations when choosing whether to hold or sell their stocks.

To conclude, both assets offer long-term appreciation of value. However, if one is looking to create a strong portfolio and has the right kind of funds to invest, real estate will always be a safer and less stressful platform.

After all, the demand for homes will never cease as long as we continue populating the planet – what can be a better source of assurance for an investor?

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 homes towers and 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.