Bangalore Real Estate Trends

In the last couple of quarters,the buying momentum in the property sector has been getting more visible with investors once again betting on this asset.A combination of factors,ranging from stability in property rises to comfortable position on the liquidity front,is making many come back to the real estate sector.

Interestingly,the interest rate hasnt been a great worry,though the rates have been steadily moving up in the last 12-18 months.

While a decision to invest in property is dependent on a number of reasons,property acquired from an investment point of view is always challenging.For those eying a property with the idea of earning immediate yield,location is a crucial component.

For instance,if an investor is looking to fund a portion of the property price (EMI) through rental income,he has to give higher weightage to the location than price.Needless to say,a property with the potential of earning good income is bound to carry a higher price tag.

So how does one strike a balance between rental income and cost of property while making the investment Traditionally,a property investment has the potential to yield returns in the range of 5-6 % in the form of rental income.In recent years,this percentage has come down due to excess supply in certain pockets of city and sharp increase in the property prices.As a result,in certain cases,the yield is as low as 3-4 %.If one were to take the nonoccupancy during the initial phase or at regular intervals,the percentage could drop further.

For instance,a property owner may not be able to rent out the property for 3-4 months after acquisition.Often,the failure to rent out could be due to mis-match in return expectations.Hence,as a landlord,keep the following points in mind while making your investments in property.

Locational advantage: If you expect the rentals to fund your EMIs,your property has to be in a location which has all amenities in place.Besides being closer to tech and business parks,it should have other amenities such as schools and hospitals in the vicinity.Not only does it make your tenant committed to the place,even replacement will be easy to come by.

Avoid complete dependency on rentals: Dont invest in a property with the hope of funding through rental income.Ideally,your dependence on rental income should be less than 50 per cent so that any stoppage of rental income will not be a burden.

Look for continuity: Look for a long term relationship with your tenant and provide value addition to your property.Not only will it increase the intrinsic value of the asset but also will make the occupant less willing to move out of the property.A decade ago,this piece of advice would have been dismissed as,why should a property owner worry about occupancy Today,its a buyers market and he needs to be humoured!

_{Source: Bangalore Mirror Dt:31-8-10}