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Investment in property is a lucrative option in a country like India, where the real estate has been developing at a rapid pace in the last decade. There are two types of property investors – short term, i.e. those who invest for the short term, known as property speculators and long term, i.e. who have an investment horizon of at least five years.
The short term investors put at stakes a lot of risk factor. Long term property investment is a different policy. The objective of a long-term property investor is to buy a property at a low price and sell it at a higher price. To be able to do so, one needs to know what is going to happen in a certain location over the next few years.
Hot property market
A hot property market is one where there are upcoming changes in the infrastructure, leading to growing interest of the home buyers. Infrastructural developments like proposed highway/expressway or metro connectivity or connecting roadways are the reasons that push the real estate development in an area, leading to constant appreciation of property value.
Every major city would have growing areas – in case of Pune, this would especially include areas like Undri, Baner, Kharadi and Wagholi, in case of Mumbai it would imply areas like Navi Mumbai, Powai, etc, in case of Bangalore it would mean expanding areas like Whitefield, Air port Road, Srajapur, Vijay Nagar, etc.
Infrastructure also includes things like shopping and entertainment facilities. Growing areas are those that have a lot of employment options, because people always want to live close to where they work. Property market also grows in areas where large corporations are relocating or already exist and have room to expand. Due to all these, demand for housing units increases in these areas, leading to real estate boom.
Why invest in growing locations?
If you are a potential investor and you have a limited source of income, then it is advisable to invest in a growing location, not an established one. Here are the reasons why investing in a growing are may be a better option for you –
(I) Properties in established locations cost a lot of money. Growing or newly expanded areas can fetch you property at a much lower price.
(II) The long-term investment value of established areas is lower. The costly or ‘prime’ areas gained their value over a certain period of time but will eventually stagnate.
(III) The real estate gains its value because of new infrastructure projects, shopping centres, public transport facilities, etc. All these can happen only in new growth areas, because established areas tend to have reached saturation point in these respects.
(IV) Established areas have a lot of problems arising out of overcrowding, lack of parking, open spaces, playgrounds for their kids, pollution and traffic clogging.
(V) Even with the best of intentions, the city planning authorities can hardly provide any solutions to the problems in the prime areas. For one thing, there is simply no space left.
Although the properties in prime areas may have high value, the probability of constant appreciation is lower than investing in new growth areas. Keep it in mind that long term property investment means buying real estate in an area while it is on the rise, not when it is in saturation or decline mode.