By Dr Sanjay Chaturvedi, LLB, PhD
- Long-term Investments :
Real Estate is a long term investment plan. Since India do not have any exchange nor a regulatory market, it takes time ti sell the investment or liquidate it. The price do not fluctuate on daily basis. The appreciation or depreciation takes place with a span of three or more years. Capital appreciation happens on when supply is less and affordable demand meets with current price level.
2. Large Funds:
Real Estate is capital intensive business. A small shop or flat / apartment in urban centre will not cost less than Rs. 2000 per sq.ft. In Mumbai, Delhi, Bangalore or mega cities will not offer you less than Rs.20 lakh (Two Million) for a Room with kitchen. For investment in real estate one has to go with large funds and for at least three year period.
3. Less liquid:
Since REITs and Mutual funds are having listing obligations, individual properties are still not having any formal market place in India. It takes time find buyers. Even if you find buyer it takes at least 45 days to complete the transfer formalities. India’s Land Revenue Code and property transactions is governed by almost 500 age old Act and rules. You often get surprise after close of deals and competing the transactions.