Real estate is a long term investment; the buyer should look for long term profits rather than immediate returns. On the flip side, the annual returns a buyer gets from investment is limited to 2 to 4 per cent after deducting taxes and maintenance costs.
It is a matter of pride to own a house. Undoubtedly, it gives relief from nagging landlords and uncertainty of living as a tenant. However, the buyer should also should check and assess the future difficulties that may arise when owning a house.
Comfort, convenience and luxury are the key factors for buying a house. The City real estate market is driven by the people who own it for living in them.
Almost 80 per cent of the people buy property to stay, compared to 20 per cent who buy property as an investment or to gift to their children for future needs, said Jaiveer Reddy, president, CREDAI.
Real estate is a long term investment; the buyer should look for long term profits rather than immediate returns. Investment in real estate has an average of 10 per cent appreciation ever year — based on the figures for the last 30 years.
The market has temporary ups and downs but mostly have an appreciation in a long run, he said.
Buying a house is a safe and secure investment. Investing in a stock market or a business brings a high possibility of capital erosion. When it comes to buying a house, the chances of capital erosion are very less.
As it is a priority sector, the government is also offering income-tax benefits for the house owner. The interest paid on housing loan for up to `1.5 lakh can be deducted from taxable income.
The buyer also can have a tax exemption up to `1 lakh (Section 80C) on the principal amount, provided he is residing in the house or living in other city for a job purpose, said Chalapathy Rao, vice president, APREDA.
On the flip side, the annual returns a buyer gets from investment is limited to 2 to 4 per cent after deducting taxes and maintenance costs.
These have to be paid irrespective of the occupation of the property. It is very important to buy a house, where there is high potential to rent. If it is vacant the owner loses money, he said.
It is always safe and good to buy a house for living, where the instalment is almost near to the rent of the property. Even after paying instalment for 20 years, the buyer can slowly own a house. The rental value would only increase in a longer run, where in buyer has to pay a fixed instalment.
The buyer also should look at security of the job and the proximity of the travel. Many times, the buyer choose a property in the far off locations from the City, end up paying heavy petrol bills and losing valuable time.
It is very important to calculate the costs of petrol, (which are ever rising), time, depreciation and maintenance of the vehicle before deciding between the properties, Rao explained.
Buying a house is definitely best option in the outskirts of the City as the real estate prices are at the lowest, provided the buyer doesn’t need time and money on travelling. However, the market prices in and around HITEC City gained momentum and touched the peak, due to less supply of flats, he added.
The interest rates on housing loan are hovering around 11 per cent (floating, monthly compounded). The buyers can avail a loan of almost 30 times of monthly income without crossing 70 per cent of the property value.
The net salary of an individual should not fall beyond 40 per cent of his gross salary after including the proposed instalment in various deductions from the gross salary.
The banks will also check the repayment capability of the customer by various ways before providing him a loan, said a senior assistant manager of a nationalised bank.