Hot spots for residential realty

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Several cities are seeing high growth turning them into the next investment destination for residential realty. Even as various studies point to their emergence, an investor would do well to carry out proper due diligence

Home buyers are no longer content with a roof above their head, or a space they can call their own. They are approaching the entire purchase process with the mindset of an investor. Even as they are looking at comfort and other amenities, their sights are fixed on the appreciation potential.

The country's real estate market is also witnessing the rise of a new class of customers: double income couples who form a significant proportion of second home investors.

Even as this new class has taken to calculating risks against returns, it is usually family elders, friends and local brokers whom they turn to for advice. Decisions are based on limited information, gut feel or some tip about possible returns. Basing one's decision on such supposedly time-tested strategies could result in a bad investment.

As an investor, one should remember that the realty sector is no different from any other investment avenue, and professional guideposts can help one identify good investments and also give a framework to base one's decision.

The Demand Drivers

The demand for residential units in India has surpassed the limited supply a decade ago. This continued shortfall has translated into property prices going out of reach of the average buyers in most metros. However, demand keeps increasing. As a result, two trends have surfaced over the last several months. One, due to non-affordability, significant demands have shifted to Tier-II and Tier-III cities, which has turned them into locations that could potentially yield good returns. Second, prices began to stabilise at the higher level in metros but with a strong basis for further appreciation in some pockets due to high demand.

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