KOCHI: As safe as investing in gold, real estate was the next go-to choice for Keralites, especially for NRIs when searching for investment avenues. Things have changed in recent times, according to industry sources, the return on investment (ROI) seems fastly diminishing with a mismatch of demand vs supply being reported across the city.
As strange as that sounds in a metropolitan city like Kochi, industry experts say 80 per cent of the investments in apartments were done for speculative reasons, the price slump and tougher laws have resulted in many of them being left unoccupied as renting it out was never owners motive to begin with.
Geojit Investment Strategist V K Vijayakumar says the occupancy rate of relatively newer apartments is just over 20 per cent, owing to an average yield rate of just 2 per cent for apartment rentals in Kerala.
He says real estate goes through veritable boom cycle for about eight years, with that period ending in 2012, resulting in an inevitable price slump. “Add to it, demonetization and the Benami Transaction Amendment Act of 2016, transactions have come down by 80 per cent,” says Vijayakumar.
He added that in real estate, there is a time correction where you see the number of transactions and speculators decline, while the prices may remain stagnant for five to six years, but will slowly pick as time progresses.
According to Anas K of Choice Properties in the city, the apartment rental market is seeing more supply than demand in Kochi, keeping rentals comparatively low for the past few years. “In places like Kakkanad, where scores of high-rise apartments have come up to supplement the IT boom, the situation is grim with flat owners being forced to comply with less rent as availability has ensured consumers have plenty of options.”
However, an independent property dealer, Raymond Anthony says the apartments in areas like Kadavanthara, Panampily Nagar, Kaloor within the city, bucks the trend with them been fully occupied and rents staying fairly high. “A 1,500 square feet 2-3 bhk apartment with all basic amenities still attracts a monthly rent of 25,000 rupees in these areas,” adds Raymond.