While real estate may give better ROI than any other investment instrument, can an end-user afford to think like an investor? We get some answers
The psychology of home buyers and their expectations vis-à-vis return on investment (ROI), have traditionally been different for investors and end-users. However, this difference may be gradually disappearing, at least in the top eight cities.
Thinking in terms of
risk-versus-return is something that is predominantly done by investors.
“Whether the mindset of an average end-user is similar to that of a
seasoned investor today, is very much debatable,” said a panelist at an
investment seminar. Take the case of Ramakant Nigam, an employee in the
power sector who rented an apartment in Atta Market, close to the
central business district of Noida, at Rs 18,000 per month. With 12
years to go before he retires, Nigam invested in a property in
Ghaziabad.
Nigam believes that he made a sound investment decision. “When I can buy the same kind of property at Rs 60 lakh in Ghaziabad, why should I invest Rs one crore in Noida?
It does not make sense to pay extra for a property that has lesser
chances of appreciating, as against an upcoming market. Moreover, it
gives me the flexibility of mobility, if I get transferred tomorrow,” he
reasons.
This raises a fundamental question,
as to whether houses have become more like trading commodities and the
emotional quotient associated with its purchase, has diminished in
leading Indian cities. According to Sandeep Ahuja, CEO of Richa
Realtors, in real estate, even if the investor
does not have very sound economic wisdom, the chances are that he will
not lose his money. Compared to real estate, stocks are risky, as most
of the companies are not blue chips and will have debt. So, even if the
quantum of return is not that high in real estate, it remains a safe
investment avenue, he maintains.
Naushad Panjwani, managing partner,
Mandarus Partners LLP, points out that one also has to consider the
buying pattern. Indians generally prefer to buy property in the top
eight cities where they work, or in their home towns where they intend
to retire, even if they live on rent in the city where they work, he
elaborates. “So, if a person is not an investor and even if I show him
research that establishes that there is fantastic return in a city other
than his place of work or home town, he will not invest there,” says
Panjwani.
Analysts maintain that end-users
should not buy homes on the basis of expected price appreciation. A
house may give better ROI than any other investment instrument but one
has to look at a long-term time frame – of around ten years. In the
residential segment, even if you pick the right project at the right
price, it may take three to five years to get ROI. Time frame is
important for investors as well, and the product will vary accordingly.
E.g. In the residential segment, speculators can opt for pre-launch
properties in north India and make money in one or two years. For mid to
long-term investors, the commercial and retail segments may be a better
option.
However, if one is looking at a
fairly long-term period, then, investing in land would be ideal, as the
returns are highest in this category. There are instances where people
have made returns worth a thousand times their initial investment, over a
period of 15-20 years. Ultimately, each home buyer has to take a
conscious call, on whether s/he is an investor or an end-user.
Read all such Property News at CREDAI MCHI – Thane Unit website.
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