Post-Covid peripheral areas emerged preferred realty destinations in cities

After initial experience in working in companies like Sony India Private Limited, IC and Elite Landbase and several renowned construction companies as Business Development Head and other leadership roles, he is now working as an accomplished resource specialist (real estate and fund management) across the country. The management graduate from Faculty of Management Studies, University of Delhi, firmly believes that in the post pandemic scenario and with the growth of the work from home culture, peripheral city /areas have emerged as the clear winners in terms of preferred choice of the investors. Speaking to Bizz Buzz exclusively, Siddharth Maurya, shares his thoughts on various new trends in the country's realty space

Now that it has been two years with people operating in Work From Home (WFH) culture, and literally triumphing over its monetary benefits in terms of the huge chunk of savings; amid all this peripheral city /areas have emerged as the clear winners in terms of preferred choice. The three major aspects to keep in check when making a real estate investment are the current market price, scope of appreciation and the surrounding infrastructure. The knowledge of surrounding infrastructure is really important as it helps in mitigating the scope of investment on long-term basis

The opportunity cost of realty investment in comparison to other instruments is favourable. Real estate as a tangible asset class is less volatile when compared to equities. Despite a heavy toll due to a multitude of factors, the real estate segment, especially the residential realty segment, has withstood the pressure of time and is an ideal investment class for medium and low-risk appetite investors

Do you think that peripheral cities are scoring above big cities in terms of real estate investment, with the concept of work from home fast catching up?

Beginning from the very basics, some of the most primary emotional values that an individual associate with when investing in a property are tranquillity, comfort and value for money. Now that it has been two years with people operating in Work From Home (WFH) culture, and literally triumphing over its monetary benefits in terms of the huge chunk of savings; amid all this peripheral city /areas have emerged as the clear winners in terms of preferred choice. The three major aspects to keep in check when making a real estate investment are the current market price, scope of appreciation and the surrounding infrastructure. The knowledge of surrounding infrastructure is really important as it helps in mitigating the scope of investment on long-term basis.

Is space crunch also a crucial factor contributing significantly to this phenomenon?

As per recently released CII- Anarock Consumer Survey, 41 per cent respondent property seekers may buy a second home for personal use, 65 per cent respondents who work from home will opt for bigger houses, 68 per cent prefer peripheral/suburban areas. This clearly indicates that specially, the category of end-users is open to remain remotely far from the hustles of urban city just so they can grab a bigger space. The metro cities are not only densely populated with residential and commercial structures but has land prices fairly higher for a first-time buyer. Conclusively, for this set of buyer/investors peripheral cities are emerging to be the ideal choice for investment due to immense space and proximity to metro city.

But appreciation is also an important aspect that an investor looks at while investing in properties. So what is the scope of appreciation in such locations?

The peripheral locations when compared to the crowded urban cocoons offer a safe and long term investment plan. As the infrastructure surrounding the region develops overtime, and with scope of more land banks available there is chance of establishing bigger structures. Additionally, the rate of price appreciation gets better and better with time and each surrounding development.

As much as 58 per cent of around 149,000 homes launched in 2020-21 are located in the peripheral areas of the top 7 property markets, showed data from Anarock research. The pandemic has had a significant impact in terms of project launches around this region. Since most of the properties in peripheral areas are in their primary stages of development, the lower price point not only makes it attractive but also makes the overall transaction a smart one. With homes shifting to peripheries, it is highly likely that large employers will occupy some space or open their smaller version of commercial centres/hubs to be in proximity for corporate professionals. The advent of such commercial spaces will be giving a major boost to the overall region's stature and value.

Urban layout and architecture must feature prominently in the investors' or buyers' wish list….what do you think?

The CII-Anarock Consumer Survey mentioned above also highlights that attractive pricing continues to rule. Developer credibility is the second-highest priority for 77 per cent of the surveyed buyers. Project design and location also feature prominently on the wish list.

Location being the deal-maker/breaker for closing property transactions has gained a new nuance with peripheral cities coming into the picture. The newly developed areas are being equipped with elements of modern layout and architecture. This makes them an attractive proposition to consider not only for local but also global investors and NRI buyers. Post-pandemic with digitalization gaining better grounds in real estate homebuyers are keenly exploring the options in each category from property search to documentation and legal advice to down payments, each and every aspect is accessible via a single click. Lastly, it is crystal clear that realtors with sufficient online presence will rule the roost going forward. Strong and strategized social media presence will be among the most effective technique in marketing your property on the right platforms.

Now generally speaking, amongst the investment options available such as a fixed deposit, gold, mutual funds and PPF, people still consider real estate or property investment as one of the safest ones. Being one of the few tangible investment options around, real estate is still the most trusted one. Do you subscribe to this view? If so, why?

Certainly yes! The opportunity cost of realty investment in comparison to other instruments is favourable. Real estate as a tangible asset class is less volatile when compared to equities. Despite a heavy toll due to a multitude of factors, the real estate segment, especially the residential realty segment, has withstood the pressure of time and is an ideal investment class for medium and low-risk appetite investors. However, when they say, the land is the best investment option on the earth; they fail to specify the type, residential or commercial? This is the million-dollar question a property investor, aiming to earn a rental income, asks before putting his hard-earned money in real estate. Honestly speaking, both residential and commercial property investments come with their own set of pros and cons. Let us analyse in greater detail.

The investors are primarily driven towards investing in residential properties and earning a rental income out of them. There are a multitude of factors behind this trend such as easier acquisition or construction of a residential property, lesser approvals, faster clearances, comparatively lower initial investment and easier resale. Moreover, residential properties are likely to get tenants faster than their commercial counterparts.

However, if we look at the historical Return on Investment (ROI), rental returns from the residential property are way lower as compared to commercial properties. Rental returns from residential properties can be pegged at 2 per cent per annum on an average.

Let us try to understand by an example, a luxury 3 BHK flat of Rs 2.5 crore in an upscale locality of Gurgaon is likely to fetch rentals at Rs 40,000 to 42,000 per month or Rs 4,80,000 to 5,04,000 lakh annually. In addition to this, the rate of appreciation is hugely dependent on a range of factors such as location, presence of physical and social amenities, city and connectivity quotient of the region. A key advantage for residential property is that the maintenance cost is far lesser in comparison to large commercial properties. It is an important factor as these charges can eat up a significant part of the rental income earned from property investment. If the budget is low, it is better to go for a residential property.