Kumar Gera addresses common queries and concerns relating to investing in real estate

That is the scope for real estate as an investment vis-à-vis avenues like the stock market or gold?

Real Estate, over the long term has always been a good investment. It has potential for very high returns on investments if approached on a carefully selective basis. One needs to appreciate that in real estate developments, two properties right next to one another can have a huge difference in terms of returns on investment since much depends upon the quality of the end product. Comparisons with the stock market or gold can throw up inaccuracies since ‘period of the investment will vary significantly. Plus for both real estate and the stock market much depends upon a particular stock and a particular property, which could be at significant variance to the respective ‘markets’

What are the aspects that need to be considered before taking a decision?

For acquiring a quality end product an investor must evaluate numerous factors such as the location, its surroundings, future expected developments (planned and/ or municipal reservations) in and around the area under consideration, infrastructure in the area such as educational & medical facilities, transport, shopping, entertainment, roads and so on including addition, the end product is also impacted by its individual design, specifications, facilities and amenities, size (for ease of resale or rental), exclusive. Appreciation is always more in cities & localities that are considered to be growth centers.

To what extent should one rely on the track record of the builder or previous growth in capital values and rentals?

The track record of the developers is critical while making an investment decision, particularly if it is a project ‘under development’. Is the builder concerned about his customers? Is the builder concerned about his reputation? Has the builder successfully completed at least a few projects? These are good questions to consider while evaluating a builder.

What are the projects/ locations to be avoided if one is purchasing based on the expectation of appreciation?

Investments that should particularly be avoided are lands and any type of properties that do not have required clearances or are unprotected from illegal encroachments and properties with any kind of encumbrances. In addition properties that may not (for whatever reason), be resold easily should also be avoided from investing in.

How can one ensure safety of the sum paid while investing in other cities?

This again requires care in only dealing with reputed developers, executing the final agreements and completing all required formalities such as obtaining the lawyer’s title certification, registration of agreement etc. and not investing with just ‘understandings’.

What are the expected market trends for 2006? Any guidelines for buyers?

My personal view for 2006 is that there will be a continuing rise in prices of selective good properties in locations which are preferred destinations. In short, in the real estate space it is the good quality of ‘end products’ that will witness significant appreciation.

Mr. Gera is Chairman-CREDAI (Confederation of Real Estate Developers” Association of India), MD-Gera Developments Pvt. Ltd, a member of the Task force to prepare the National Housing & Habitat Policy appointed by the Government of India.