Unable to afford property in the city they live in or fed up with the slow appreciation in prices, most of the investors & home buyers are choosing to invest in real estate out of the city.
Consider the example of Mumbai and Pune, “Property prices have remained flat in Mumbai during the last 3 years, whereas in neighboring Pune, prices have become by 15 to 18% in emerging areas and rental demand can also be very high.” This has resulted in avid buyer interest, as Kishor Pate.
However, unfamiliarity with another city’s real estate market can be a drawback as Mumbai resident and IT professional Vinayak Gawade realized two years ago. A home buyer invested in an under-construction housing project in Pune, looking to earn rental income from it. He paid Rs 25 lakh as well as the developer promised possession by June 2016. However, what Gawade did not know at that point was that the project had stalled over a land dispute. He relied on the recommendation of friends and relatives when investing, and that was clearly insufficient. He now visits Pune every now and then to evaluate the progress of construction, an expense, and effort he had not foreseen. “The risk of investing in another city has not paid off. Construction continues to be on as the builder got all of the clearances only last year,” he says. Not just is he not earning everything from the property, he or she is servicing a housing loan EMI of Rs 8,000.
Where he went wrong ?
Bought a flat in an ongoing housing project for Rs 25 lakh in Pune in 2014 with the hope of making rental income from it. Though promised possession in June 2016, construction is still not complete as builder got necessary clearances only last year. Meanwhile, the home buyer will continue to service a mortgage EMI of Rs 8,000.
Hyderabad-based IT professional , also learnt a tough lesson. Last year, he invested in a flat in a group housing project in Surat, worth Rs 19.5 lakh. He paid Rs 8 lakh from his savings and requested a bank loan for your remaining amount. However, the bank rejected his loan application as there were legal cases pending against the developer of the said housing project. It took Mistry eight long months to obtain a loan sanctioned. His fault lay in not doing enough research while investing and depending on word of mouth alone.
Booked a group housing flat worth Rs 19.5 lakh in Surat. Paid the downpayment of Rs 8 lakh from his savings. Bank rejected his home loan application for the remaining amount as builder had legal cases pending against him. It took him nearly eight months to get a loan approved.
So, how should investors go about buying homes in the housing projects in cities other than their own? “Investigate the reliability of the developer before investing. Though real estate Regulation Bill will eventually get rid of fly-by-night operators, many unscrupulous developers continue to be extremely active in emerging cities. Many of them do not possess necessary clearances for their projects or even clear ownership of plots. They also engage in shoddy construction, and often do not have the capital to see projects to timely completion. They tend to attract buyers with lower prices and huge discounts. It’s advisable to employ a lawyer to check the legal veracity of a project. If buying real estate in another city past projects, apart from land title and clearances, watch out for construction quality of the developer’s Rely on experts. Feedback from end-users in past projects also need to be taken.
According to indianhousingprojects.com ,understanding regulations and laws regarding property ownership and taxes in a place where you don’t live is a major challenge. Though there are several real estate portals that offer information on brokers, projects and cities prevailing rates as well as specific laws, it’s not exactly like purchasing exactly the same city where we live. Santhosh Kumar, CEO Operations and International Director of JLL India, says, ““The the easy way navigate the details gaps is to handle a reputable property advisory to identify and close a good deal, because this provides the investor a representative on the ground to tackle every aspect.”