For the savvy investors who are wondering why returns on real estate are not good, this is because real-estate has already seen a bull run in 2003–13 and now the market is in correction mode. So, buying a house because it has given good returns for our parents makes you feel that if the price of something is going up, it will keep going up. But reality is that if the prices keep going up at the same rate, it will become a bubble i.e. overvalued assets. So there are two paths for real estate prices: First is to keep rising relentlessly and become a bubble and burst eventually. Second, decrease the appreciation rate till the economy catches up. Second option seems to be happening.
I believe the correct way to decide if you should take the path A or path B in respect to your investments should be based on “Opportunity Cost Calculation”. I try to think that instead of path A, if I take path B, how will my future look? We have to think that if we take an alternate path, are we decreasing the risk and are we increasing the probability of higher returns?
Here are our assumptions of expected future returns:
- Real Estate: 2–6% and decreasing
- Equity: 15%
- Gold: 10–11%
- Liquid Funds-7%
- Rate of Increment of Rent - 7–10% but decreasing.
Should one never buy a house ?
One should buy a house probably in the second innings of life when the following conditions are true.
- You have pretty much decided where you are going to spend the rest of your life.
- You have no desire to start a business, become an entrepreneur, take risks where you might go through a phase where not getting a salary for months will not bother you.
- You can pay a significant part of the cost of the house as a down payment, let’s say 50%. Higher the better.
- You plan to live in the house i.e. it's not just a financial investment. Since you don’t plan to sell this house for decades, illiquidity and taxes don’t matter.
Affordable places around Mumbai are mostly seen around suburbs. Places like Goregaon, Kandivali, Malad and Borivali are looking at the most upcoming properties in the next couple of years. Real Estate in those areas are comparatively at affordable rates with good location and amazing amenities. I came across this upcoming property by Mahindra in Kandivali called "Roots". I was amazed to see the kind of amenities they are providing at very good prices. Their website gave almost all the necessary info. required to pay a visit to the site. Great location, closer to W.E. Highway and Railway Station. It is worth a look!
The process of buying a new house is often full of hurdles, but it can be eased with some trustable builders in mumbai. You would think that one of the most frustrating hurdles would be to get your finances together. It isn’t. In reality, finding the location to move into still continues to be the problem most pondered upon. If you work in Mumbai and are looking to buy a new house, there are two localities that come to your mind. The first one is obviously Mumbai itself, and then there in Thane. The number of people buying a property in Thane is increasing majorly because of the affordability and the amenities offered.