Investment in house on discounts ideal for high net worth individual now

Low housing prices, decade-low interest rates, and attractive discounts from developers have combined to make this the best of times for buying a house for self-use. But is this also a good time for the high net worth individual (HNI) to scout for a property for earning investment return?

Experts say HNIs are already out looking for opportunities. Anuj Puri, chairman of ANAROCK Property Consultants, says, “Recent trends confirm that HNIs are eyeing residential real estate amid the property market’s enhanced regulatory environment, and volatility in other asset classes.”

Why now? Demand has been lacklustre and prices have not moved up much in the past few years. Builders are willing to offer discounts. Anurag Jhanwar, co-founder and partner, Fintrust Advisors, says, “The impact of Covid has led to liquidity squeeze, resulting in reduced prices, and in a few cases, distress opportunities.”

These are also good times for those looking to finance their investments. Somy Thomas, MD (valuation and advisory & capital markets), Cushman & Wakefield, says, “Interest rates are at among the lowest levels in the last decade or so.”

Until some time ago, most markets had heavy inventory overload, which acted as a barrier to price appreciation. That is changing now. Thomas says, “Most markets are seeing absorption of ready-to-move-in inventory.” However, she sounds a note of caution: Investors need to look at stuck projects and their resolution to evaluate future inventory. Thomas adds, “Southern cities have less inventory issues compared to the North. But even within NCR, markets like Gurugram have less inventory issues.”   

Risks still exist: While the realty market is on the mend, it is not out of the woods completely. “We may continue to see downward pressure on prices for the next couple of years,” says Pankaj Kapoor, founder and managing director, Liases Fora. The situation will, of course, vary from one micro-market to another, with some likely to recover faster.

What should you do? An investment in housing at this point will pay off only if you can get a good price. Kapoor says, “Pick up value assets. Owing to distress in the market, you may probably find someone willing to give you a 30-40 per cent discount.” He adds that you should not go for prevailing prices in the hope that you will get good appreciation in the future.

Investors need to have a lot of holding capacity. Puri says, “You need to have a horizon of 5-10 years to earn decent returns.” According to Puri, HNIs would earlier invest only in luxury properties. He suggests they should now consider options even within the affordable and mid segments. However, he warns that these will require greater due diligence.

The choice of location will play a major role in returns your investment earns. Proximity to employment hubs should be a key criterion. Good connectivity is also a must.

Investing in under-construction properties will carry higher risk – like delays and even non-completion – but could potentially offer higher rewards. If you decide to take this risk, go with a quality developer. Niranjan Hiranandani, president, National Real Estate Development Council, says, “Opt for branded developers, who will ensure possession on schedule.”