Where to Invest? Residential or commercial property?

In India, for most of us buying a property has always been an emotional decision. Having multiple houses is a symbol of high status in the society. To give an example, a family already having their own house, again goes for an investment in a second house which they know for sure they are going to rent it out. Let us suppose a person invests 70 Lacs in a house. He finances it through a bank loan @10% paying a monthly EMI of Rs 67551. The person spends another 4 to 5 Lacs to furnish it further to make it ready for rental. Now he gets a monthly rental of Rs 20,000 per months which is meager 3% return on his investment. Can you imagine he is paying an interest at the rate of 10% on reducing balance to the bank & only receiving 3% annual return on his investment? Is it not a loss to him? Some people say, the person will make money by way of property appreciation & high rate of rentals in Future. I agree to that to some extent, but if we really deep dive into this, we can question is it the best instrument for investment. The most common reason why people go for an investment in home is that getting a home loan is easy at lower rate & it also helps you save some tax. But another reason is they do not research good return investment opportunities & also they do not involve or contact the competent real estate advisor who can help them search the best investment opportunities with in their reach & circumstances.

But if you talk to serious & knowledgeable investors they are very well aware that investments in land & commercial properties yield much higher rate of return compared to residential properties.

Now these days’ builders are coming up with attractive options of providing their customers with assured return on investment which normally yield much higher rate of return compared to normal investment in residential or commercial properties. This scheme is an instant hit in the market & there are many takers for this scheme in the market. Though these schemes look very attractive but investors should be extremely cautious while getting into such an agreement. We are providing you with a ready check list of what to ensure before investing:

Check facts about the builder:
• Builder should have a proven track record & is known for keeping its commitments.
• The property offered must have received all requisite sanctions, Licenses and permissions from all competent authorities.
• Property must be free from all kind of claims, mortgages and encumbrance.
• Must have all the required completion & occupation certifications.
• It’s advisable to obtain proper search report from a competent legal expert.

If it’s a second sale or if you are buying from an individual Seller:
• Property must not be under any family disputes.
• There must not be any Third-Party claim against the foresaid property.
• There must not be any hidden, silent or undisclosed Agreement involving the property.
• That the seller has not executed any Power Of Attorney against the property in the past.

Disclaimer:The Author is a real-estate consultant, the readers are advised to do their own research & analysis before taking any action. The author is not responsible for any consequences. The author is only delivering his views & inviting response in the way of comments/views from the readers.