The real estate market has seen a lot of churn in the past few years, and now it is expected to see a sharp rise in prices.
Real estate developers’ body, Credai-MCHI, has said that prices could go up by 10–15 per cent in April due to a sharp increase of Rs 400–600 per square foot in construction costs because of rising inflation in key commodities like steel and cement, among others. A report by Colliers released on Tuesday also pointed out that the cost of construction has increased by 10–12 per cent on an average annually because of increased input costs.
A few real estate experts that Outlook Money spoke to said that with home loans still at reasonably low levels and prices mostly stable, it would be ideal for someone who is intending to purchase a house to proceed with their decision. For end-users, the time is right when the purchaser or buyer is assured of financial stability and can service long-term debt, says Gulam Zia, senior executive director, Knight Frank India.
Since real estate is a high-value investment, experts suggest some common mistakes to avoid while buying a home purely for the sake of investment.
1. Inadequate Research: Research plays a vital role in terms of investment, particularly in housing. Harish Sharma, founder & CEO, Plinthstone REMA, a multi-specialty real estate advisory firm, says that one just cannot go about casually buying an apartment and expect immediate results and returns. "Development in locality, connectivity, crime rate, quality of the habitat and population, highway access, utility centres, quality of schools, etc., and overall facilities in the area must be assessed," he says.
Other important things to keep in mind are whether the infrastructure of the area will improve, whether the property is under litigation or otherwise legally problematic, and who the seller is. “You cannot buy property in an area that is on the decline and expect it to appreciate in value. It is also advisable to stick to reputed developer names," says Sharma.
2. Wrong Expectations: Investors should have realistic expectations while buying real estate. One should think about how he/she would want to use the property before investing in it. Whether you want to use it to buy a bigger property, or you are looking at rental income, or planning to shift in some time, your choice of property will depend on all these factors. “Real estate is not an asset that’s easily liquidated or cashed in quickly. So, if the type of property you buy is wrong for your purpose, it will affect your returns negatively," adds Sharma.
3. Improper Documentation: Documentation is perhaps the most important factor to consider when buying a property. There is a possibility for people to ignore documents, and failure to read the contract in its entirety could lead to them losing out both on their money and the property. Overlooking small details in the contract can have disastrous consequences, with builders often having certain clauses that could lead to long-distance legal hassles in the future, according to Sharma. Properly scrutinising the documents to check if they are legitimate and up-to-date would go a long way towards hassle-free buying. The best option would be to have an expert look at the contract before signing it.
4. Underestimating Costs: Underestimating the costs related to developing, converting, or constructing real estate can lead one to incur a loss instead of reaping profits. Taxes, government fees, and registration charges associated with a property should also be kept in mind before one invests in a property.
5. Mistiming The Deal: Timing is the key to making the most out of real estate investments. Most builders offer sales on their products, and waiting for them could see one getting a better deal on his/her investment. The demand and supply situation in a particular location also has an impact on prices, so it is crucial that one times the deal perfectly to make the most of it.
The return on investment in real estate, like in any other instrument, depends on the valuation at the time of acquisition.
