REAL ESTATE INVESTING
Investing in Real Estate in India is becoming painful despite the RERA act.
Buying or selling property is fraught with documentation requirement, encumbrances, registration and still someone can file a court case and it can go on for years.
Further, particularly 2nd hand transactions, involve black money.
Add to it if property is prime, the political angle and goondaism.
In the west, the property dealer being a legal person takes care of all the documentation and there is no scope of being cheated or issues cropping up in courts that take a long long time.
Further, RE investment and sale is now becoming tedious with the diminishing of joint family and couples having one or two kids and staying separately away from the joint family. This means that a large house is empty and difficult to dispose off if the parents are 75-80 years old and the children do not stay in that place or stay abroad.
My advice/recommendation (not binding or marketing it-just a thought) for investment in RE is as follows:
1) If you can rent it, all the better as there are more properties available on rent than demand as in last few years people invested heavily in gated and high rise apartments in the hope of selling at huge profit which didn't/hasn't materialized.
2) Advantage of renting is if you are going to invest, say, 2 crs, the FD int @ say conservative of 6% will fetch you 12 Lakhs per year or 1 lakh per month. For that you can get a decent 2,3,4 bedroom flat for 50,000 Rs per month. This saves you 50,000 per month which you can invest and earn better.
3) Flat owners living in a different place than their ownership, prefer a decent couple who pay rent and if required, by giving 6 months reasonable period, may vacate. They are ready to lower the rent for them to avoid litigation or abusive tenants staying.
4) Rental yield is just 2-3% and while you can get better rents by giving out to group of bachelors (girls or boys), or as AIRBNB, but many gated communities object to it.
5) With a small family, running around during old age to sell a house or flat is tedious, particularly if kids are abroad. (Western countries just give 2 weeks off in a year and it takes at least 5-6 months staying in that property to sell a property in India, else agents take you for a ride.
6) Lot of unscrupulous builders who take the money and not complete. Eg Unitech and a whole of companies in Delhi- Noida belt. People have taken EMIs and paid the builders hoping to repay the loan by self occupation. But work is not completed and EMIs are on making a big cash flow impact.
7) Preferable to buy with a very well reputed builder or ready to move in property will at least ensure you have the property
8) Maintenance of the property is another big headache. If house, there are recurring costs, if gated community, costs keep increasing and the maintenance cost goes up. If kept locked, maintenance is still to be paid.
9) It does not mean you should not invest in RE. If you are planning to settle in one city, you can buy a flat and live in comfort and one typical Indian concern is of landlord asking you to vacate and you are not able to find another flat to live in. Living in own flat has the advantage of modifying, redoing to meet your needs. But disadvantage is slow accumulation of things that may not be needed later.
RE DESPITE RERA (OUR COURTS TAKE AN INORDINATE LONG TIME- MAYBE 20-30 YEARS TO DECIDE CASES) IS FRAUGHT WITH UNDERHAND DEALINGS (ALWAYS THROUGH AGENTS TO EASE PAYMENT UNDER TABLE) AND INNUMERABLE DOCUMENTS - SALE DEED, ENCUMBERANCE DEED, ELECTRICITY APPROVAL, RERA APPROVAL, MUNCIPALITY APPROVAL ETC, ETC WHICH A NORMAL PERSON CANNOT VERIFY.
THUS POINT 7 IS ONE OF THE BEST OPTION.
