Investing In A Peripheral Location? Know What Could Land You In Trouble
Bengaluru-based brothers Vaneet and Preet Singh decided to go for a 'value-for-money' deal in one of the fringe localities of the city that was being touted as a locality with a great potential. The broker, who introduced this deal to them, also mentioned that he could give an additional discount if there was a group booking. Both brothers called in three of their friends all of whom felt that this could be the best bet.
Now here's the catch.
The Singhs got a Rs-12 lakh discount and a 2BHK unit cost them Rs 26.50 lakh each. Their friends too availed of the 'irresistible' offer. However, soon after the deal closed, too many issues sprouted. At first, the seller allowed the new home owners to shift before procuring the occupancy certificate. Later, the seller denied showing on paper the amount that was paid to him. “We paid Rs 13 lakh in cash but later we were told that since we got a hefty discount, only Rs 13.5 lakh would be shown on the sale deed. We goofed up big time,” says Vaneet. The Singhs are holding on to their property to sell it at the 'correct price'.
But here's what to expect if you are looking at investments in peripheral areas:
Never miscalculate the growth horizon
Fringe areas are in every way 'fringe' so do not expect development to happen over a year's time. It usually takes around 5-8 years to get good returns.
Be selective about your choice of property
If your purpose of an investment is immediate returns, then you should consider apartments. Usually, ready-to-move-in apartments yield rental returns and unlike plots, you needn't wait for a long time to reap the benefits. However, it is also a known fact that plots yield the best in the long run.
Take into account the development quotient
Your investment will be a good for your portfolio only if the locality has a potential. For example, a healthy capital appreciation, an upcoming infrastructure such as a new SEZ, or an IT facility that could give a fillip to the job market or even a metro network will ensure better traction in the locality, thus, affecting the demand and supply for housing.
Set your priorities
If you are a small investor, perhaps, staying away from the location where you are investing, go for a safer form of property. Apartments usually are systematically managed unlike plots that require constant attention, fencing and surveillance. Apartments mean lesser maintenance troubles and there is an entire eco-system built just to ensure that your property is safe.
No compromise on the developer's credibility
A lot of cases about unauthorised constructions, illegally obtained land parcels, units with no corporation sanctions have been reported. To avoid these, never buy from unstructured sellers and aggregators. A credible developer will always offer you the benefit of a brand value and after sales management.
Bank on your own research
It is often believed that banks and financial institutions guarantee whether the property you are buying is free from any encumbrance. Banks do their due diligence. However, be ready to cross check facts and figures and do not be in haste.
Estimating the potential
Everybody ultimately wants to invest wisely. A locality that is earmarked for growth will always have a self-sufficient social and physical infrastructure. Any add-on is always good for the capital and rental health of a particular locality. However, capital values may dwindle while infrastructure is in progress. For example, a metro network that usually takes three to four or more years to be developed may affect price points in the area but from the announcement of the infrastructure to the next few years, prices do climb up by 15-25 per cent as seen in the case of Delhi Metro. Better connectivity and access to conveniences facilitate greater housing demand.