Investor's Guide to Pune Real Estate

When it comes to investment in Pune real estate, smaller investors do not enjoy the same bouquet of options as their institutional counterparts. While the latter category of investors can afford to handle portfolios consisting of many properties, smaller investors are limited by the fact that lending institutions will usually not anything over and above a second home loan.

The RBI has imposed these restrictions because it is trying to curb speculation - which is the opportunistic purchase and disposal of properties (also known as 'flipping' in markets like the US). This is justifiable, since speculation has, in the past, been the main cause of driving up prices unrealistically in many cities such as Mumbai, Chennai, Bangalore, Delhi NCR and Pune is no exception to this trend.

Of course, smaller investors can still use their personal funds to invest in more than one property. Where this is possible, such investors tend to plug their funds into rent-generating properties which, depending on their choice of location and project, will potentially yield good, regular income, says Kishor Pate, CMD of Amit Enterprises Housing Ltd.

Is this is wiser option that investing limited funds in gold or the stock market? It certainly is. Investment in a well-chosen residential property in Pune is a perfect way to counter inflation. Neither gold nor real estate relinquishes their intrinsic market value. But while gold does nothing but sit in the bank locker or the home safe while it appreciates, a residential property bought for investment will earn the owner rental income even as it appreciates.

If the market dynamics in the chosen location are favourable, the rental come on the property will increase in line with the growing demand for rental properties there.

 Guidelines to real estate investment

• The first factor to be considered while purchasing an investment property in Pune is location. Pune is a diverse market, and it is possible to get confused by the multitude of options available. Depending on one's budget, one can consider luxury housing in established locations and premium or budget housing in upcoming locations. There are two main criteria for making the right decision - the property needs to be either centrally located, or located close to one of Pune's IT or non-IT commercial hubs.

• The second factor to look out for is the legal sanctity of the project. The investor must be sure that there are no litigations or documentation shortfalls involved - either on the project or on the plot on which it has been built.

• The third important factor is the right point at which to invest. Many lay investors prefer to wait indefinitely for prices to fall. However, the fact is that the demand for residential property in the most lucrative locations of Pune is only going to rise. Waiting for the 'magic price point' will invariably mean missing out on very good options which were affordable at one time and will be too expensive to invest in a year or even a few months down the line.

• The fourth factor is how long one intends to stay invested in the property. The minimum period required for avoiding capital gains tax is three years, but certain locations will require a longer time to gain sufficiently in capital value for profitable resale. An investor must know when the right time to sell the property comes around. In Pune, a well-chosen property will continue to gain in intrinsic value as well as rental income generation potential. The temptation to exit and make a tidy profit may be strong at times, but it may make more sense to defer such a decision for yet a while longer.

• The fifth factor is the professionalism and credibility of a developer on Pune's residential real estate market. Even with all the above factors attended to, the fact is that many good investment projects in Pune are still under construction. The developer should have a good record for time-bound project completion. The investor should ensure that he is not dealing with an obscure, unscrupulous and potentially under-funded developer or else the investment could turn into a nightmare situation.