Is Mumbai realty for an opportunist investor?

Akosha Tiwari, a BPO professional, has good understanding of finance. She recently sold off her ancestral property which fetched good returns. The money received was invested wisely in a 1BHK flat of 550 sq ft in Andheri West for Rs 65 lakh. The flat was bought and intended for end-use as she was living with her family in a bigger apartment at Goregaon West. This took place in 2011 when the property prices ranged from Rs 11,000-18,000 per sq ft in Andheri West. At that time the locality was popular with easy connectivity to the Bandra-Kurla Complex, which was then a secondary business hub.

Today, Tiwari is all set to tie the knot. She wants to finance her new home in South Mumbai by selling the Andheri flat. She evaluated the cost of her flat in Andheri through intensive market research and was delighted to find it worth more than a crore. She says, “I am happy to find that the worth of the property has increased. Also, there are buyers in the market who want a property in Andheri, since I have been getting calls.”

This can be because the property is new, the location is strategic and it is a destination for the nouveau rich. Currently, property prices in Andheri West range between Rs 18,000-22,000 per sq ft.

Tiwari’s case is a classic example of investing the money at the right time and in the right place. Although exiting the market at this point of time might not be a favourable choice. Like Tiwari, there are many investors in the market who are making money, despite slowdown. Escalating property prices in the last few years is the prime reason behind the increase. The reason for the price rise is the increased cost of land in Mumbai and various other factors.

The reason for price rise
“Actually capital values have not risen but construction and land costs have gone up in the last three years. Selling price is the sum of the mentioned costs plus the developer’s profit. With the cost component only rising, there is little chance of prices going down. Moreover, land is a scarce resource in Mumbai. It is either mill land (most of which is already bought and developed) or factory land or slum-encroached/ redevelopment land (and developing these involves complicated procedures). The government does not have any land to offer," says Ramesh Nair COO & International Director - JLL India

Being an opportunist investor
Those buyers who can seek opportunity in the real estate are the real opportunists who make the most of the buyer’s market. “In Mumbai, prices have doubled in the past 4-5 years in some areas. For example, if a buyer invests even in the slum areas, chances are that the property prices will double even there. Money grows fastest in Mumbai and that holds true as per past trends. In short, Mumbai realty is for an opportunist investor,” says Ghulam Zia, executive director, Knight Frank.

New Projects Vs Old Projects
Since an investor is not a future end-user, an under-construction project always excites him. “Pre-launch projects from successful developers who have a good track record, get a number of bookings. Once it gets completed, the prices reaches the peak. A ready property is easy to sell", says Rohit Purohit, an independent investment advisor, practicing in Mumbai, Thane and Navi Mumbai.

True story for Vasai-Virar
Vasai-Virar is a classic example where property prices have actually risen in the past five years. Here is the past trend of property price rise in the area, as per Magicbricks data:

However, the infrastructure here still remains a drawback. “Water quality is not good and has left many residents sick. Electricity is erratic. Commuting from the station to your residence can only be via autos, which costs a fortune. Mosquitoes and insects menace is compounded during monsoon,” says Shashiraj Rao, one of the ex-residents of Vasant Nagri, Vasai East. Since investors are not actual end-users, infrastructure plays little role while deciding the location. Supply-demand tactics are the major players in deciding the pricing pattern.

Those who invest in real estate to make quick returns are smart, especially those who had entered and exited the Mumbai market by making profits. One of the reports by property consultancies says, “The areas which will benefit from Metro connectivity have already seen price rise over the past eight years. This trend is set to continue with the launch of the Santra Cruz Chembur Link Road." Hence, it would be interesting to see whether investors will continue to make the most of the hype in the market or will fence-sitters actually enter the market to end their long wait.

Source: magicbricks

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