SMART SOCHO: How to ensure great returns on your property

There are various key factors that help determine the final valuation or price appreciation of property ranging from its location, brand equity of the builder to ongoing infra projects in the area, writes Rajesh Kulkarni.

Until a few years any real estate pundit could tell you that the location of the project was the key to its quantum of price appreciation in the future. Times have changed. These days, when an investor asks the same question to a realty expert, the response he gets is, ‘Focus on the location, quality of construction and the brand.’

At a time when well-informed buyers and investors are the norm and competition among developers selling similar projects in the same vicinity has increased manifold, it stands to reason that the developer’s brand equity, quality and facilities being provided at a project, are now as important as its location when it comes to its price appreciation.

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It’s also the reason why select projects in sought-after destinations like Kandivali, Powai, Mulund or Thane, which are witnessing a proliferation of under-construction projects, command a ‘premium’ on their price vis-à-vis the others. “The reputation of the builder, the quality of construction and the amenities on offer are today some of the key factors that buyers and investors consider carefully prior to making a decision”, affirms Ravi Desai, a realty consultant dealing in residential properties in the Powai-Mulund belt.

Desai adds that this price differential of about 20-25 percent is visible at every stage of construction beginning from the pre-launch stage, all through the various phases of construction till its completion. “There are some investors who book a flat in the initial phases of an under-construction project located in a prime suburb, hoping to reap huge profits on completion on the strength of its location alone. Many of them tend to be surprised on finding out that it’s the flats in the next door project with better amenities by an A-list developer that actually fetched higher returns on completion.”

So what are the key parameters an investor needs to keep in mind to maximise his returns prior to investing in a property?

Location is still King:

It goes without saying that a good location with adequate connectivity options will always fetch good returns. For example, apartments and flats located close to a work/commercial hub will normally face no problems getting tenants or buyers. With a huge majority of people in metro cities like Mumbai, Delhi and Bengaluru staying in rented accommodation, paying a slight premium on the rent or sale price for a home near their workplace is generally not an issue given the convenience factor.

Moreover the exact location of the house in an area or the building itself has an impact on its perceived value. For example, a house located close to a religious place like say a temple or a mosque, is likely to fetch a lower price. The reason being prayers during odd hours could disturb people, especially school going kids.

Similarly some developers are known to extract a higher PLC (preferential location charge) for an apartment that overlooks the sea or is garden-facing. Corner homes also command a premium given the fact that they are open on two sides.

Quality of Construction:

Prudent investors know that this is a vital area that is often ignored or overlooked by younger, less experienced investors. Simple facts like the quality of materials like sand, cement used in the construction have a bearing on its value appreciation post-completion.

Problems like water seepage, peeling of the exterior paint, cracks and breakages are known to be rampant in buildings where inferior quality materials have been used, which in turn adversely impacts their valuations and poses hurdles in getting the market value inspite of the prime location.

Builder’s Reputation / Brand Equity:

Most investors know that investing into a project being developed by a small developer or fly-by-night operator comes with huge risks even though it might sound a lot cheaper at first. The problems that subsequently raise their head could be many ranging from completion delays to price escalation and even shoddy construction. All this can be avoided by parking your funds in a project by a reputed developer with an excellent track record.

A reputed developer is usually careful quality and completion issues and normally has all the required clearances and approvals in place before project completion. This comes as a huge relief to the investor who doesn’t have to worry about tackling unnecessary hassles (like in the case of smaller builders). Further he is assured of impressive returns given the reputation and goodwill of the developer in the marketplace.

Area & Design Aspects:

While a huge area with optimum usable space is always welcome, it’s not always about the size of the property but also its design. Again reputed developers usually have a panel of leading architects supervising this crucial aspect of their project. Some even opt for reputed international consultants and design experts to achieve that level of perfection.

From an investors perspective this not only ensures the maximum value for his buck but also the optimum utilization of space with minimal wastage. Niche concepts like an open kitchen, private sun deck, a cosy study and a kid’s room that can enhance the living experience for the residents of that property then become a distinct possibility.

Infrastructure Spotlight:
Buyers look for property in a well-connected area with ample infrastructure support. Ergo any ongoing or scheduled infra project increases the value of real estate in the vicinity by leaps and bounds. There have been numerous instances where property values have increased by as much as 60-70 percent post the announcement or commencement of a major infra project in the vicinity.

The reasoning behind this is that governmental agencies and in some cases corporates too make huge fiscal and manpower investments into such projects which acts as a booster for residential demand in the area.

Similarly infra initiatives also attract major retail and corporate players, generating additional employment opportunities, which again trigger demand for homes, thereby impacting the prevailing property prices in the immediate area.

Redevelopment Redux:
Again a frequently ignored and under-rated aspect, the developer or contractor that redevelops an existing building also plays a big role in deciding its final valuation once the redevelopment is complete. Opting for the services of a known brand or reputed builder not only ensures that the work done is of the highest quality but also transforms the new building into a new landmark in the area, thereby giving it a premium tag when it comes to deciding on its valuations.

WRITTEN BY

Rajesh Kulkarni

Rajesh Kulkarni is a professional content writer and he writes on various contemporary topics.... read more