I BOUGHT A FLAT FOR 60 LAKHS. HOPE TO GET RENT 12000/ MONTH AND HOPE THE PROPERTY VALUE WILL RISE. IS IT A WISE INVESTMENT ?

“Sam, I have bought a flat for Rs 60 lac and I am getting rental of Rs 12000 per month. I hope that the price will increase with time and I should get a decent return in next few years…one of our investors said.”

🍭I gave a thought over it. Following points are worth considering:-

🏦The rental yields of 2.5 – 3% pa is at a lower side.

🏦It means that either people can not afford to pay higher rentals or supply of flats is much more than demand.

🏦Those who cannot pay higher rentals can not be expected to raise housing demand in recent future.

🏦If low rental is due to excess supply of flats then price rise should not take place.

🏦The rental yield is 3% whereas housing finance rate is 10%. The gap is very high and not sustainable.
The maintenance cost and property tax reduces the yield further.

🏦Rise in income in last 10 ten years is much less then rise in property prices. Hence affordability is becoming less.

🏦Investors now know that prices are going down and still it is difficult to find buyer.

🏦Supply is equal to 40 months demand in big cities. For healthy market it should be less then 9 months.

🏦The black money absorption is reducing. Hence less attraction.

🏦The builders can not retain the unsold property as per new law. So distress selling takes place.

🏦The demand for housing loan is very thin. Some time back it was main business for banks.

🏦The government will promote supply of low cost housing.

🏦Liquidity has decreased and delayed.

🏦Greed for property has also decreased.

🏦Prices are location based. Investors are now choosy.

🏠One must own the property which he consumes. Real Estate as an asset class hold no prospects in return. Be cautious before you take the loan for Real Estate purchase.

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