by Mr. Sachin Khandelwal, Magma Housing Finance
Top-10 metros,
returns on rentals have been in the range of 3 % per annum in residential and 6
% plus for commercial real estate.
The economic slowdown
has crimped launch of new real estate projects across India, which has affected
both end users & investors, as the upper middle class considers a second
house as an asset for wealth creation that can generate rental yield & capital
appreciation.
However, returns from
the real estate market - both residential & commercial properties - across
India are seeing a correction due to exceptionally high appreciation seen from
2005 until 2008 and, then again, in a few markets from early 2011.
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| Mr. Sachin Khandelwal, Magma Housing Finance |
In such a scenario,
an investment - be it short term or / even long term - does create a few
anxieties for the investor.
Across most of the
top-10 metros, returns on rentals have been in the range of 3 % per annum in
residential and 6 % plus for commercial real estate.
However, for high -
value properties, even 8% to 10 % yields are possible (say for super HNI
segment investing in prime commercial real estate).
For investment in
higher rental yields, investors must keep the following points in mind.
Developer/ promoter..
The track record of
the developer / promoter, be it in case of commercial (ability to lease) or /
residential, is a primary consideration.
Project location..
It is a critical factor for one to consider.
Demand supply balance in that area needs to be studied well. There are always
pockets & clusters where some key business and trades of that particular
city are thriving and tend to continue to keep their base.
Past appreciation
& future capital appreciation in
good established areas, old parts of the city for both residential &
commercial, are a safer place to invest, though the value of these properties
will be higher.
End Use..
Captive end users
& social infrastructure (school, shopping, colleges, clinics / or
hospitals) around the area for long-term sustenance of both residential rentals
& capital appreciation.
For commercial real
estate, one needs to see if there are other business hubs such as alternative
business districts, sub-urban business district around that area so that the
spill-over and captive requirement can be met with a property located close to
such hubs.
These typically tend to
provide more economical expansion and are prone to inbound relocations.
For a commercial
investment, a bank branch, ground floor high-end retail shops, jewellers, etc.,
are premium properties, so one should look out for such kind of neighbouring
properties.
These bring a higher
premium in both rentals & capital
appreciation of neighbouring properties.
In case of income
yielding commercial assets, the lease term, lock-in and the pedigree of tenant
are important. However, one would recommend that if you are a first-time
investor, look for a residential property as an investment.
Only regular
investors should have a fair mix and increasing proportion of commercial
properties for looking at higher yield/returns over a period of time.
About the author..
The writer
Sachin Khandelwal is Chief Executive Officer, Magma Housing Finance
Sachin Khandelwal has nearly two decades of experience in banking, finance and automobile industry. In his new role as Chief Executive Officer (Designate), Mr. Sachin Khandelwal will spearhead the housing finance foray for Magma, based out of Delhi and will leverage the nationwide network of more than 256 branches and existing customer base of more than 7,00,000 and build the dedicated team for housing finance biz.
Prior to joining Magma Housing Finance, Sachin was the Managing Director and CEO of ICICI Home Finance Company. He earlier headed the International Retail Business that included Global Remittances, NRI (Non Resident Indians) and Global Private Client Business. His prior assignments at ICICI included setting up and scaling the Vehicle finance business and the Cards & Merchants Payments businesses.
Sachin also headed the Mobile Commerce initiatives for the bank and worked closely with regulators and key industry associations to roll-out the guidelines for mobile banking and prepaid instruments in India. Prior to ICICI Sachin has worked with Godrej & Boyce, HCL Nokia Pagers and Honda Siel Cars. Sachin is a Mechanical Engineer and an MBA Marketing. He loves cars and is an avid Formula 1 Racing fan.
Magma Media Contact:
Mr. Suryakant Mishra
Contact No: +91 22 22842221
Email ID: suryakant.mishra@magma.co.in
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