Showing posts with label real estate valuation. Show all posts
Showing posts with label real estate valuation. Show all posts

Rental Property Scenario in Hyderabad

Dear Readers,

We are pleased to share our first Guest Post by Mr. Kunal Chhibber. Our guest has shared his views about the esteemed rental-investment options in Hyderabad. Please note that we did share our views on Hyderabad Real Estate some time back which was also featured on Mission Telangana. We thank our guest writer for his article.

Rental Property Scenario in Hyderabad

Hyderabad has attracted various research, manufacturing and financial companies. This city has become the fifth largest contributor to the country’s overall gross domestic product. Large numbers of people are planning to get settled in this city and if you are also one of those working professionals or students who are looking forward to know more about the houses for rent or for sale in this city, then this article will guide you the best way.

As we all know the cost of living in Hyderabad is quite economical than other metro cities in India. People coming from different cities to work for big giants prefer rentals in Hyderabad property, more than purchasing it. Huge numbers of people are job seekers who come and search for temporary accommodation in Hyderabad to start or make their career.

Property Market In Hyderabad

Real Estate market is a good investing option in today's time where you can invest your money. Be it the residential or the commercial property, the prices are always increasing in cities like Hyderabad, Delhi, Mumbai, Pune, etc. There are plenteous residential or commercial properties which are ready to move. In case you looking to invest in a commercial or residential land then it will definitely fetch you a lot of money. Also, making investment in such properties, which are rented easily, is always a good deal.

2-3 BHK houses for rent in Hyderabad ranges from 10 to 25 thousand per month whereas the penthouses or villas may cost you in lakhs per month. If you are an investor then buying a property is a good idea as this way that you can lease it out for some good source of monthly income.

Apart from this, there are end numbers of upcoming residential and commercial projects which seems to be quite profitable investment. Many investors are buying these properties for the purpose of rent whereas few of them purchase to sell after earning a good amount of growth or appreciation. The booming real estate industry assures lucrative returns.

With the onset of a developing realty industry, the property developers are enhancing their outreach in Hyderabad. You will find a good range of options for accommodation in the city. Starting from 1 BHK to large independent bungalows, all are available on rent. Some of the most popular locations in the city include Banjara Hills, S.R. Nagar, Kondapur and Hi-Tech City. These areas have a range of property offerings suiting your requirements. You can also get furnished, semi-furnished or unfurnished houses, suiting your necessity. It will be extremely helpful if you do a thorough research on all the possible resources to find a good accommodation. In case you are very new in Hyderabad, there could be numerous details to guide you on the web. Also, contacting real estate agent and brokers can get you the best deal.

Therefore, if your an immigrant and are not sure of how long you will be living in this city, going for a rental accommodation is the best choice. With property developers rapidly constructing residential complexes in the city of Hyderabad, you will always have a varied range of options suiting your requirements and budget.

 ------ Keep Sharing & Thanks for reading RealT Horizon :) ------

Industrial Real Estate – A Treasure?

We recently came across some assignments in industrial area and that gave the way to this post. We thought of accessing this area as an option of investment and after analyzing, we came up with many interesting conclusions.

What is Industrial Real Estate?

All the land and properties located in the manufacturing zone of a city/town can be categorized under the category of Industrial Real Estate. This includes:

  • Industrial Land
  • Industrial Sheds
  • Industrial Storage Spaces
  • Industrial Laboratories
  • Industrial Offices, etc.

In simple words, each and every realty asset class, related to the production/manufacturing of goods & located in the Government-specified industrial areas comes under the periphery of Industrial Real Estate.

What if you don’t have any industry/production unit?

This is the main issue that every investor faces while investing in industrial area. Even we were facing the same issue from a long time and now we are hunting desperately for an industrial asset. Let’s see what made us change our mind.

Unprecedented Rental Returns
As has been our philosophy, we pay equal heed to rental returns as appreciation returns; we were astonished by the potential of industrial properties in this aspect.

An industrial land is capable of paying a rental return to the tune of 200% more than an equivalent investment in residential property.

Take for instance, an amount of 5 million INR invested in residential property in India will yield a rent in the range of 8K-12K INR per month; while an equivalent amount invested in industrial area will yield anywhere between 20k-25k INR per month.
Huge Asset Creation
Industrial property transactions are dealt in square meters rather than square foots or square yards. The reason being, land is relatively cheaper in industrial areas and the availability is abundant.

Hence once invested in an industrial area, you will have a huge asset created at your disposal.
Future Option
In case you or your heirs think of moving into the manufacturing sector, you won’t have to worry as you will have your own land to start the production unit on.

Of course this reason looks stupid and insane but trust us, sooner or later most of us faces this issue. We want to start our production unit, but are inhibited due to the land scarcity issues.
Steady Land Appreciation
Also for our readers who are motivated more by the value appreciation rather than rental aspects, industrial real estate provides awesome prospects.

Industrial land appreciates at a slower but steady rate and at the end of a period of 5-10 years; one can expect handsome returns on his investment.

How can I invest in this arena?

  • Look for a cheap land on a property portal on your city and grab a decent amount, in the range of 1000-5000 meter squares
  • Get 2-3 sheds constructed of about the size 300 meter squares each
  • Put up your property for rent and enjoy the spectacular returns for life!

What are the risks in this type of investment? <link> 

  • You may be unable to find a tenant for your property: No issues, you have an asset and sooner or later you will find one.
  • Too much investment upfront: Think of it this way – which other asset class promises you the same passive returns on same investment?
  • Land may get acquired by government if unused: More reasons to cheer up in this case as the new land acquisition law provides more than awesome returns upon acquisition.

Closing Thoughts

We have surveyed a lot in this arena and have come up with the above conclusions. This was the only reason that we took so much time to write this post. After our research and analysis, we feel that we made a big mistake by not investing in this sector earlier. But this is our understanding; you may definitely differ here.

------ Thanks for reading RealT Horizon J ------

High Priced or Low Priced: Which one should I go for?

Many often, we come across this dilemma when we wish to make an investment, not only in Real Estate, but even while investing in Equities and Bonds. Let us try to decipher this confusion.

Define a Time Horizon

The first thing you should do is to decide is the time window you are looking at while making the investment. The decision of high/low valued assets will follow your time horizon. We typically define the windows as follows:

1-5 years: Short-term Investment
5+ years: Long-term Investment

Everything has a Limited Upside

This is one fact that you should imbibe in your thoughts if you want to be a successful investor in any asset class, real estate included. You cannot count indefinitely on the increasing prices and trust that they will keep on increasing forever. There will be a stage when the price movement will virtually halt and the growth rate will shrink manifolds.

The Decision!

Once you have decided your time frame and imbibed our above advice in your wits, it’s time to take the decision. Check the analysis done below:

Here we are taking an assumption that the upside for High Priced property is 10 years & for low priced, it is 7 years. This is justified because generally the high priced property is more sustainable as compared to the low priced property.

Initial Investment
Initial / Long Term Growth Rate (%)
Short Term (1-5 years)
Short Term Returns
Long Term (5+ years)
Long Term Returns
Low Priced
$ 100,000
13 / 8
$ 163,047
$ 190,178
High Priced
$ 1,000,000
8 / 8
$ 1,360,489
$ 1,999,005

As is apparent from the above analysis, the Low Priced Property yields more returns in short term and comparatively lesser returns in the long term as compared to the High Priced Property.

With this illustration, this discussion comes to a conclusion:

Low Priced  :
Short Term
High Priced :
Long Term

Disclaimer: The above analysis holds good for most of the cases, but not all. Hence it is advisable to take an informed decision before making any investment.

------ Thanks for reading RealT Horizon J Happy Investing ------

Is this the Right Time for NRIs to Invest in India?

NRIs (Non-Resident Indians) comprises of an important chunk of population which contributes the most to Indian economy, without even being physical present here. India is blessed to have such a huge Indian population fueling its growth from abroad and the same is true for NRIs, who are blessed to have India as their motherland which provides them such fantastic investment opportunities. Let’s see how.

INR vs. $: Who all get benefitted with their movements?

 If you follow the Asian Financial and Economic markets, you would know what is going on in the volatile Indian markets. INR has been falling continuously against US $ before lately regaining some strength. At the time of writing this post, INR was placed at Rs. 61.20 against $ 1. But the situation had been worse a few days back when INR had touched Rs. 67 = $ 1 mark, creating an all-time low record; So much so that people had started comparing INR with US Cents; Rs. 1 = 1.5 cents.

So how is the above information related to our topic on NRIs? Well, let us tell you how. We will be extremely straight forward in putting forth our views on this topic. Consider the following situation:

  • Mr. A is an NRI, residing in Michigan, USA.
  • He aspires to invest in India and his obvious choice would be to invest in Real Estate; because he is sane ;-).
  • He wants to invest in a range of INR 5 million to INR 7 million.
  • Let’s compare the scenario when INR was 67 and when it is 61 (rounded off for simplicity) against $.

Cost of Property
Cost in $
(Case: INR/$ :: 67)
Cost in $
(Case: INR/$ :: 61)
Absolute Difference
% Difference
INR 5 million
$ 74,627.00
$ 81,967.00
$ 7340.00
INR 7 million
$ 104,478.00
$ 114,754.00
$ 10276.00

Just look at the above figures. Mr. A would have saved a fortune, at a discount of ~10% if he would have invested in the same property when $ was making rounds near INR 67 as compared to the current situation!

Closing Thoughts

Dear NRIs,

India is a great destination for investment – this statement needs no evidence. So just be a little more rational and act as soon as possible to make investments. This is because you never know where our new Governor & upcoming new Government will take the INR ;-). It is always better to be late than never J.

RealT Horizon

PS: We would have made the investments if we would have been in your place, you may not. It’s subjective as well as cognitive.

------ Thanks for reading RealT Horizon J ------

What will be the future of Hyderabad Real Estate post Telangana?

After taking the example of Hyderabad Real Estate to demonstrate our Rent by Price Ratio for Valuation <link> and sharing views on other Real Estate Valuation Methods <link>, today we are taking up a very hot topic of Indian realty sector after much reluctance – Hyderabad post Telangana. We did not want to discuss it on the public forum but due to increasing demand from our readers, we are finally expressing our views on Telanganized Hyderabad.

What is Telangana?

For our international readers, let us first introduce the issue. Telangana is going to be the next state in India which will be formed by dividing existing state - Andhra Pradesh. There are a lot of issues prevailing around this topic and a lot of political and social arguments have already been exchanged. Finally the air is – the state Andhra Pradesh will be divided to make way for a new state Telangana.

But this gives rise to another domino issue – where will the golden hen, Hyderabad go? – Andhra Pradesh or Telangana? Government seems to be struggling hard with this issue and looks like Hyderabad will act as shared Capital for both the states or will be given a status of Union Territory. So which way the real estate market of Hyderabad take turn – will it shoot up; or will it experience an avalanche? Let’s explore the possibilities.

Effect on Social, Political & Economic Scenario

Social Impact
Social unrest, communal riots now and then, clashes between pro & anti-Telangana communities.
No unrest, demands of both the groups shall be considered.
People not sure of their identity – whether they belong to Andhra Pradesh or Telangana!
Well defined boundaries, identity certainty.
Political impact
This has been a long political agenda and leaders too are divided over the issue.
Along with the views, leaders will be divided geographically too. Politics will focus more on development rather than the division agenda.
Development work is crawling at a slow pace as the leaders from different groups don’t promote regional developments.
New projects will emerge and existing projects will pick up pace.
Economic Impact
Hyderabad, being the IT capital of India, attracts software investments worth billions of dollars every year. But due to this uncertainty, international firms are being hesitant in investing in Hyderabad market.
With incorporation of Telangana, this uncertainty will do away and investors will be more confident in investing there. Companies like Facebook, Google & Apple have long awaited plans to spread their legs in Hyderabad.
Due to restricted investments, new jobs are not being created in this market – very less immigration.
Once the scenario gets clear and investors start investing in Hyderabad, new jobs will be created and huge chunk of IT population will migrate to the town.

Effect on Real Estate markets

As is clear from the above table, the social, political & economic scenarios provide a promising picture once division is complete. So if we extrapolate them, there seems to be no reason why Real Estate market shouldn’t flourish. But that would be a vague approach to come to any conclusion. Let’s try to add rationale to this extrapolation.

Effect on Real Estate
A more sustained & stable social scenario
Definitely gives a boost to sentiments of locals and prices shall go up
Leading towards a stable and productive government
New development projects => Boost to real estate
A safer investment paradise for investors
Increase in immigration => higher paying capacity => increase in demand => increase in real estate pace

So if we consolidate the above factors, it looks like that you should rush and grab a property in Hyderabad as soon as possible. We have done it, following our instincts and analysis; will you?

Disclaimer: The above analysis is done solely by RealT Horizon. These are our views and you should add yours before going for an investment or disinvestment in Hyderabad. <Long term position in Hyderabad>

------ Thanks for reading RealT Horizon, your feedback is appreciated J ------

Rent by Price Ratio: Real Estate Valuation by Rent

Continuing our RealT valuation series, we now bring to you – Rent by Price ratio. In our post – “Valuation by Rental Prospects - Real Estate Valuations” we discussed how an individual should take into consideration the rental prospects while valuing a property. Today let’s discuss whether or not a prospective rent enough?

Facing dilemma: Which property to select?

Many a times, we get confused making choices between different assets. It becomes tough to select one from a choice of 2-3 properties. In such confusions, the decision is generally made based on only apparent features (aesthetics, size, location, ease of transaction etc.). To provide a rationale to this dilemma, we bring to you the concept of Rent by Price ratio (RP ratio).

Rent by Price Ratio (RP)

As is self-explanatory from its name, RP ratio means:

This gives you a fraction which can be used very effectively for evaluating more than one property together. To state in simple words, this ratio gives you the percentage of initial price that you can recover per annum by rental income.

How to make the choice?

Let’s take a scenario that you have a choice to make from among the following options:

Prospective Rent
RP Ratio
INR 25,000 pm
INR 7.5 million
INR 20,000 pm
INR 5.5 million

                                                         Source: Real Scenario of 2 properties in Hyderabad, India

As both the properties provide awesome investment opportunities and are located opposite to each other, it becomes increasingly difficult to make a choice among the 2.

But looking at the last column (RP ratio) in the above table, it becomes very clear that Prop2 provides a return of 4.36% against 4.00% of Prop1.

Hence it makes more sense to go for Prop2, than for Prop1.

Dilemma Solved, Decision Simplified B-)

Closing Thoughts: We formulated the above concept and analysis while facing a dilemma on making the choice on the above 2 properties only. This RP ratio provided us a yardstick to go for Prop2 & we followed it; you may not. It’s just indicative, not a sure shot approach to making decision.

------ Thanks for reading RealT Horizon J ------

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