“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.