NEW DELHI: When Pallavi Sahu (43), a legal professional, invested in a two BHK home in Ghaziabad in 2013, it was priced at Rs 48 lakh. As the realty sector was doing well, she had expected at least 15% of return from the property in 3-4 years, a rosy picture shown by her brokers.
She got the possession of her property in 2017 and as she wanted to dispose of the house, it was still commanding the same price, to her utmost shock. After a wait of seven years to get a better valuation, she sold it off at Rs 50 lakh in 2021, when she required cash to expand her legal business.
“My friends who had invested in flats in 2010 got a return of 20 to 25%. So I decided to buy. But then it turned out a bad decision to buy. I sold few shares and one mutual fund to pay the initial amount for the booking. What was frustrating was that even when I rented it out, the rental income was stagnant at Rs 10,000 and I did not see it appreciating anytime soon. So I thought, looking back, had I stayed invested in the market, my investment would have doubled at least,” Pallavi added.
Pallavi is not alone. Many individuals who had invested in real estate in NCR post 2014, expecting good returns, are stuck with incomplete projects, delays and poor appreciation of property price, which is stagnant for almost 7-8 years. Even those who were luckier, were not able to book more than 10% of profit.
According to a report published by realty consultant Anarock, approximately 1.13 lakh housing units in NCR worth Rs 86,463 crore are completely stalled which account for a whopping 66% of the total 1.74 lakh stalled units in the top seven cities.
More than 3.28 lakh homes are either terminally stalled or heavily delayed in NCR alone. Demonetisation, implementation of RERA and GST drove investors out of the market, while the fall of top developers like Amrapali, Jaypee, 3Cs kept even genuine buyers at bay and pushed investor communities towards greener pastures like stock market which have delivered heavy returns on investment.
The fact that at least 71% (about 4.49 lakh) of these delayed or stuck units fall within the price-sensitive Rs 80-lakh budget range, is keeping mid-segment investors further away.
So has real estate as investment lost its sheen?
“Return on Investment in realty, like any other instrument depends on what is the valuation when people enter and how long they intend to stay invested. Property price was overvalued in 2014 and it will take another 4-5 years to get the same kind of return on investment, at least in the NCR market. Other instruments like stocks are giving much higher return which has driven lot of investors out from the realty market. Now it is more concentrated towards end users,” Rohit Jain, a personal finance advisor said.
Experts added another big deterrent is Long Term Capital Gain tax, which has further pushed away investors to instruments like equities as it is easy to exit.
Rohit jain added, however, that this is good time to invest in property for self use, as valuation are reasonable and there is chance of better price appreciation.
“The market is becoming driven more by end user than by investors, which is a welcome change. I feel that this is good time to invest in realty estate as valuations are correct and interest rates are low. But only if you are intending to live in the house. In last two months, I have seen many people with deep pockets are investing in high-end luxury projects, which are available are right valuation. However, the investors have to wait minimum 5-7 years to see good appreciation, at least in the NCR area,” Jain added.
Before investing in residential property
You need more research than other asset classes. You cannot go casually, buy an apartment and expect immediate results and returns. Development in locality, connectivity and overall facilities in the area have to be assessed.
Think how you want to use the property. Whether you want to use it to buy a bigger property, or you are looking at rental income or planning to shift in some time. Your choice of property will depend on all these factors.
Real estate is not an asset that’s easily liquidated or cashed in quickly. So, stress selling will reduce
your discounts.
Keep in mind the cost associated with maintaining and repairing that property.