02
Cover Story
The Economic Times Wealth, July 17-23, 2017
KOLKATA
`3,614
`3,570
`3,572
Jan-Jun
2016
Jan-Jun
2017
`3,495
Jan-Jun
2014
REAL ESTATE
INVEST NOW
Investments in property have earned insipid returns in the past few
years. Find out why this trend is likely to continue for some time.
ome loan rates are down,
property prices are stagnating and the new Real
Estate (Regulation and
Development) Act (RERA)
promises to safeguard the buyer
against delays and frauds. If you go by
what real estate developers, housing
finance companies and property
agents say, this is the best time to invest in property.
Or is it? A recent research report by
consultancy firm Knight Frank shows
that home prices in eight major cities
rose very tardily in the past three
years (see graphics). In some markets,
including the National Capital Region
(NCR) and Kolkata, property prices
have actually come down since 2014.
Of course, this is not true for the entire real estate market. While prices
have come down in some markets,
some cities have witnessed a consistent rise. Within cities too, some pockets have done poorly, while others
have flourished. This is why ET Wealth
assumed four different growth rates to
see what investors can gain from real
estate. We assumed that the buyer
would put a downpayment of `10 lakh
and take a home loan of `50 lakh (at
8.5%) to buy a property. Another `6
lakh would be spent on legal costs and
registration, taking the total cost of
property to `66 lakh (see graphic).
We then looked at the situation after
three years. If the property prices rose
by 3%, the investor would be in `7.86
lakh in the red. Even though he earns
rent (`10,000 a month increasing by
H
MUTED GROWTH, DULL PROSPECTS
Property prices in most cities have risen at a slow pace in the past three years.
The large number of unsold units and long selling time only add to the problem.
HYDERABAD
`3,710
BENGALURU `4,805
`3,620
Weighted avg
price per sq ft
`4,831
Unsold units Quarters to sell
-0.4%
39,114
10.6
POOR
OUTLOOK
MUMBAI MR
`7,994
`8,093
`8,044
Jan-Jun
2016
Jan-Jun
2017
`7,382
Jan-Jun
2014
Jan-Jun
2015
3-yr return
Unsold units Quarters to sell
2.9%
138,653
8.8
Though demonetisation hit new launches,
sales were not too badly affected. Prices too
have stagnated after a spurt.
MODERATE
OUTLOOK
NCR
`4,511
`4,400
`4,650
`3,509
3-yr return
Prices have remained flat and new launches
and sales have slackened in recent quarters.
High quarter to sell level is a worry.
WHY NOT TO
BABAR ZAIDI
Jan-Jun
2015
`4,346
`4,473
`4,250
`3,390
Jan-Jun
2014
Jan-Jun
2015
Jan-Jun
2016
Jan-Jun
2017
Jan-Jun
2014
Jan-Jun
2015
Jan-Jun
2016
Jan-Jun
2017
Jan-Jun
2014
Jan-Jun
2015
Jan-Jun
2016
Jan-Jun
2017
3-yr return
Unsold units Quarters to sell
3-yr return
Unsold units Quarters to sell
3-yr return
Unsold units Quarters to sell
3.1%
22,658
2.6%
114,064
-1.1%
180,370
5.9
Prices rising steadily and sales remain
buoyant. Low inventory is a plus. RERA
implementation can be the next trigger.
GOOD
OUTLOOK
CHENNAI
Has got over demonetisation blues, with rise
in new launches and sales. But the high
inventory remains a worry.
MODERATE
OUTLOOK
`4,662
`4,700
10
AHMEDABAD
`2,758
Prices have slipped and may not recover in a
hurry. The high inventory level may keep the
market depressed for years.
VERY POOR
OUTLOOK
`2,770
17.8
PUNE
`4,819
`4,860
`4,860
Jan-Jun
2016
Jan-Jun
2017
`4,532
`2,635
`4,407
Jan-Jun
2014
Jan-Jun
2015
Jan-Jun
2016
Jan-Jun
2017
3-yr return
Unsold units Quarters to sell
2.2%
28,110
6.6
Prices have been rising steadily and new
launches are on the rise. Affordable housing
will boost growth.
OUTLOOK
`4,614
`2,551
GOOD
Jan-Jun
2014
Jan-Jun
2015
Jan-Jun
2016
Jan-Jun
2017
3-yr return
Unsold units Quarters to sell
2.8%
32,934
7.7
Prevailing lull seems transient. New project
launches are down but sales are picking up
due to RERA.
OUTLOOK
MODERATE
Quarters to sell denotes the number of quarters it takes to sell a property in the city.
Jan-Jun
2014
Jan-Jun
2015
3-yr return
Unsold units Quarters to sell
1.7%
40,141
4.5
Prices slowed down and new launches hit a
speedbreaker even before demonetisation.
Now sales picking up.
OUTLOOK
MODERATE
Source: India Real Estate study by Knight Frank