Master your money:Have property prices in Tier I Cities peaked?
An expert advice by Mr. Aditya Verma, CEO, Makaan.com
Q: Mr.Verma, in your opinion there should not be correlation between interest rates and rental yields and in india property prices that logic totally and the logic for that is the black money will keep on defying that logic and i think going ahead that irrationality which existed for long is going to vanish slowly and the reason the property prices for long are not going to rise
A: I agree with your point of view that all interest rates including rental yield are influenced by the RBI Repo rates as the latter decides the cost of funds for the economy. I disagree with regards to your opinion on property prices not rising for a long time. In my opinion you would see the property prices rising from Jan 2016 (around 12 months form now) due to demand revival and reduction in unsold inventory. Hope it answers.
Q: Will prices in South Mumbai ever peak? How to play it as an investment destination?
A: Most markets in South like Bangalore, Hyderabad and Chennai are end user driven, which makes than less volatile compared with cites in West and North. Annual price movements in South have traditionally moved in single digits and that is likely to continue unless there is a major economic revival. However, within these markets there are areas that can give you high returns. For more check www.makaan.com/invest
Q: Sir according to you what would be a strategic fit for investment in Hyderabad, Rajasthan & Gujarat?
A: All these states are currently ruled by BJP and therefore enjoy a good state-center relationship. With the announcement of 100 Smart City initiative, many of these states will benefit by having some representation. One should look forward to infra and investment announcements connected with cities like Gandhinagar, Ahmedabad, Baroda in Gujrat. Similarly, cities like Jaipur, Jodhpur, Udaipur and Kota in Rajasthan and Gurgaon, Faridabad, Kundli and Ambala in Haryana.
Q: When it comes to equity we use PE ratio to determine if the stock/equity is over priced . But in Case of Real estate what is the technical term /or factors that determine if the price we are paying is overpriced.
A: Most real estate websites like Makaan.com publishes "Price Trends" that tracks property price movements in various cities in India. Trends for the past 5-6 years can be uses as a benchmark before making an investment decisions. You should also refer to Makaan.com Property Index (MPI) which is released quarterly. These are tools that can come handy.
Q: Hello sir, hows Pune as a real estate investment. i have shorlisted one area Keshvnagar which is proximity to Koregaon park, magarpatta, EON IT. till now its not under pmc. is it a good bet?
A: Pune is an investor driven market so you need to do your groundwork before you put your hard earned money. The best areas from investment perspective will be Wagholi, Hinjewadi and Pimple Saudagar. Hope this helps...
Q: Can the property ever get affordable in real terms in tier 1 cities?
A: There are many factors that determine the cost of property, so if there is a correction or rationalisation in any of them, it will lead to price correction. These factors are 1) cost of land 2) cost of construction 3) cost of labour 4) cost of raw material like cement, steel etc. and 5) cost of obtaining approvals. These costs can come down with government intervention. It needs to be seen if govt is keen to make Affordable Housing a reality in India
Q: What is your view in Pune residential reality sector? Does pune will grow as fast as Mumbai? Does the effect of being closest to mumbai is a point? Is it OK to invest in Pune?
A: I am positive on the future prospect of Pune real estate market. The cost of living in Pune is substantially lower compared with Mumbai. Pune is a home ground for higher education so there is abundance of talent pool. With IT and ITES sector making Pune as there hub, the realty sector there is ripe for a sustained growth. So yes, it will be OK to invest in Pune.