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Which city in India is best for real estate investment?

Wanna know the secret to real estate investment in India? There is no best city for investment. Trust me, you will hear name droppings from everyone saying Bangalore, and Hyderabad and Goa.. and others. You will also hear many people giving you binary answers – don’t invest in real estate, OR, buy real estate in this city. Neither of those advice will help you.

Why am I saying so? That’s because its true. Speak to any good real estate investor and they will tell you the same.

So how should one invest? And specifically to answer this question, where should one invest? Let me give you a framework to build your investment thesis, use this to come up with your search criteria and ultimately a real estate investment decision, and then I will tell you the best localities to invest in Indian real estate.

Ready? Great, lets go step by step. Incase you want a shorter version, read these FAQs on Real estate investment in India

  1. Decide your Investment goal: Are you looking to buy a property where you want to live at some point? Or are you looking to buy real estate purely for investment purposes? Spend a day thinking about this, talk to your spouse or any other co-decision makers. If you truly spend 24 hours to think about this, you will get clarity like nothing else, and you will subsequently choose the right property within 7 days. Seriously, I am not joking. I have seen many investors who just simply start looking at properties, they pick a city and randomly start their search. This is really bad, because if you starting looking for a property where you want to go and live, not only will you have a hard time making a decision but also end up buying a mediocre property which doesn’t serve either of those purposes. If you want to buy a property where you would want to live in, that’s fine, think of that investment not only in terms of money but also quality of life, commute, ease of access. You will find several amazing properties which will serve you well for this. But if you are thinking from a pure investment mindset, convince yourself to be objective. This is really important, the sooner you convince yourself the better investment you will make. Wondering why is that the case? Answer is simple, it because you will open up your mind to buying properties which you wouldn’t have otherwise considered – like plots, commercial spaces, apartments – especially in cities and localities where you would have upfront ruled out. Convinced? Think about the below questions to help with your decision
    1. Short-term vs Long-term Investment: How soon do you want your money back? 5 years? 10 years? 20 years?
    2. Pure investment vs Self-use: Will you ever live in this property?
    3. Investment Range aka Budget: How much upfront money you can put in, and how much recurring money can you invest for installments.
  2. Locality, not City: If I tell you Bangalore is a good city to invest in, would you just buy a property anywhere? How about Goa? Knowing the best city to invest in is no good. This is what you need to figure out: (a) which localities have the most future growth, (b) which localities can offer you the highest rental yield, (c) which localities offer you the best leverage. If you’ve already figured out your investment goal, then let’s look at the best localities to invest in, else keep reading and then come back to this
    1. Top 5 localities forReal estate in Bangalore – Hebbal, Yelahanka, Devanahalli, Thanisandra, Jakkur
    2. Top 5 localities for Real estate in Pune – Kalyani Nagar, Aundh, Wakad, Baner, Wagholi
    3. Top 5 localities for Real estate in Mumbai – BKC, Andheri, Kanjurmarg, Powai, Thane.
  3. Decide best type of property to invest in – residential vs plot vs commercial space: I’m sure you have already googled for things such as – “what is the best type of property to invest in”, “should i invest in land or flats”, “is buying land a good investment”. Let’s look at the options:
    1. Residential apartments – This is the most common way of investing, probably because it is the easiest to invest in. There are several caveats to this and different stages of properties.
      1. Ready to move in properties: Don’t buy these for investment if you want to see short-term positive ROI. Let me give an example, lets say you buy a ready to move in property in a prime locality – it’s going to cost you a lot of upfront money, plus home loan interest rate, you might get annual rental ROI but that’s going to be less than 3% of your property cost and if you are paying 7% interest rate for home loan then you’re essentially losing 4% money each year. That’s a negative investment. Don’t do this unless you are going to live in that property and save your current renting cost, or in the game for a long term.
      2. Under-Construction Properties: Consider these if you want to invest in residential apartments. But wait, don’t just buy any under-construction property. You might lose even more money if you buy a property where you need to put in a lot of upfront money. Here’s why – you’ll likely get possession in 1–2 years and cannot rent out until then, you might also pay home loan interest. So you’ll really have to wait for a few years until you see a positive ROI. Unless, you buy a property with minimal upfront investment. You will get highest ROI if you buy properties with 10:90 payment plan where you make the purchase by putting in 10% of the cost, no home loan, and no payment until possession. You will see up to 220% ROI at the time of possession, read how the 10:90 plan works
    2. Plots: This can either become your best investment or the worst mistake you make in your lifetime! Countless buyers get cheated by sellers and the plots end up in litigations or face encroachment issues. You will need to do significant due diligence on the plot and the seller. If you’re not up for it, that’s fine, there are safer alternatives. Several reputed developers are offering ready to build residential plots, this is much easier to purchase and significantly safer. As an example, take a look at Godrej reserve plots in Bangalore.
    3. Commercial spaces: These can give your significantly higher rental income, and ROI. You will however need someone to manage your property, unless real estate investment is your fulltime job.

If you would like to search for the best real estate investment opportunities in India, check out GlobalHome.

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