Investment Tips: Buying a Home That Delivers

With Real Estate Regulation Act (RERA) as well as various other policy initiatives such as the Benami Transactions Act and the Government’s determined push for affordable housing, the time has never been better to buy a home. 

We are already seeing a lot of increased activity in the residential property market in the larger cities. After the dampener of the demonetization move late last year, the positive buyer sentiment visible now is especially significant.

With the return of buyer sentiment, builders are obviously determined to capitalize on it via increased marketing efforts. Given that there is already a lot of supply on the residential market - a lot of it for ready possession - fresh launches have been curtailed so that existing inventory can be absorbed. Much of the intensified marketing efforts are centered around special deals and offers.

Advice To Property Buyers

Obviously, it is a very advantageous time for property buyers right now. Yet, they should be judicious while evaluating offers and schemes and base their purchase decisions solely on the real value of the home instead of on freebies. Buying a home is an expensive undertaking, often involving a substantial part of a middle-class family's savings as down-payment and a prolonged commitment to pay EMIs for several years.

Freebies such as gold, cars and household goods have an undeniable attraction, but they are fundamentally frivolous in nature and do not add to the value of the home.

The price of a home is obviously an important consideration for middle-class property buyers. However, the strategy of looking for the cheapest options on the market does not make much sense because it is quality that determines value. In the case of residential property, the quality of an offering is vested in three aspects:

- The quality of the location

- The brand value of the builder

- The availability and quality of facilities and amenities in the project and in individual units

The evolution of 'location value' 

Central locations are traditionally the costliest, thanks to the fact that they offer great access to many important parts of the city - most importantly the CBD and SBD (central and secondary business districts). These areas tend to host the offices of high-profile companies, which also tend to offer a vast cross-section of jobs - from highly-paid management to more modestly-paid support staff jobs. Even the second category of jobs is attractive because growth prospects in high-profile companies are usually very good. This is what makes living in central locations very desirable - and, from a real estate pricing perspective - very expensive.

In India, this mantra was rather inflexible and held true for a very long time - until the advent of the Infotech culture. The IT/ITeS industry tends to offer very good salary packages but is not focused on high-value locations. Quite to the contrary - such firms prefer to set up shop in peripheral locations so as to save on the real estate costs. As a result, many of a city's outskirts have become very desirable places for homebuyers, and they are far less expensive.

For IT professionals and industrial employees as well as property investors, buying a home in a peripheral location that connects to an IT hub and/or manufacturing belt makes perfect sense. Unfortunately, such locations attract all kinds of developers - from those who have a reputation for creating true lifestyle value offerings to those who specialize in constricted, lifeless 'pigeon-hole' homes. This is where the brand value of a developer plays a significant role.

Brand value stands for assured quality

With a lot of housing supply available in the new growth corridors, buyers are spoiled for choice. The consideration of 'ticket size - the cost of a flat - is obviously important, but one still only gets what one pays for. Ultimately, a home is not just an asset but one which performs the very critical function of offering refuge, comfort and security - the three mainstays of lifestyle. Buyers must look for options which offer them these three advantages to a satisfactory level. Branded builders provide these as part of their standard value offering because their reputation demands it. 

Facilities and amenities - life beyond mere living

If four walls and a parking space would be enough to serve our housing needs, the real estate industry the world over would be a very unexciting one at best. The fact is, urban life today places a lot of stresses and demands on us, and our homes cannot only be places of refuge but must also provide healing and rejuvenation from these. A clubhouse, swimming pool and children's park are no longer luxuries but the bare minimum an Indian homebuyer can and should expect. A residential project that does not offer these falls far short of the required mark. 

Obviously, even projects without such offerings will find buyers because of their lower prices - but such buyers find very little comfort in their purchases. While short-listing prospects for home purchase, it is definitely important to ensure that the final selection provides a decent lifestyle and not just an abode.

If one looks at the supply on the residential property market from such a focused perspective, the bewildering choice of options automatically narrows down to a more manageable and comprehensive level. Always to be kept in mind - buying the right home is not just about present and future comfort but also about investment growth. Homes in good locations, built by reputed developers with a good saturation of amenities and facilities will always yield better capital appreciation as well as potential rental income for property investors.

Contributed  by 

Kishor Pate, CMD 

– Amit Enterprises Housing Ltd