Look for deals when buying realty

This is a good time to purchase a property for personal use, but not if you are buying it as an investment.

A wait-and-watch policy is advocated in the latter case as at current levels, real estate prices are quite high across most cities. "The prices are high in most cities and it is better to wait, except for Hyderabad, where we expect a good growth and a potential for appreciation," advises Ashutosh Limaye, head - research at Jones Lang LaSalle, India.

At the same time, those waiting for a major correction in the real estate markets may be disappointed. "We do not foresee a correction. Rather the prices will see a modest appreciation," adds Limaye. Financial advisors believe that property should be purchased only if you plan to stay in that property.

P V Subramanyam, chartered accountant and financial trainer, is not in favour of property as an investment. "It is a very low yielding asset that involves a huge chunk of money. Plus, it does not have partial liquidity, so it does not make for a good investment but is a good asset for personal use," he explains.

Given the high real estate prices, there is little headroom for appreciation. "Property prices for ready apartments are unlikely to see appreciation over the next 12-18 months," says Wali Chaudhary of Pyramid Property Consultants. Real estate experts suggest that those planning to purchase property should keep searching for lucrative deals like distress sales or where the property is available at a discount.

"If you are looking for appreciation, invest at the time of pre-launches in under-construction property in select locations where rates are low and the infrastructure is not fully developed," advises Chaudhary.

Pre-launches are one such time when builders offer higher discounts. For instance, recently a reputed builder offered a pre-launch price of Rs 1.35 crore for a 2BHK in a gated community complex in a Mumbai suburb. "About 100 flats were sold within a couple of hours as it was a steal at that price," said sources.

And for those planning to purchase property for personal use, the best time to buy is when you can arrange the funds required for the purchase. "The next three to four months is a good time to buy for personal use," feels Limaye. Buyers can take advantage of various discounts and freebies offered by builders that could add up to a 3-5% discount on the ticket prices.

Real estate investments require deep pockets. Only those investors who can hold for a long term, say at least five years or more, can possibly expect "good" returns (15% CAGR) from real estate. "Those who exit earlier, say within 2-3 years, are unlikely to get more than average or fair returns (8-10%). In the latter case, after factoring inflation, the actual returns would not be more than 2-3%," says Limaye.

Real estate investments are unlikely to see a repeat of the fantastic returns posted in the recent past when prices jumped 2-5 times. For instance, a 2BHK apartment that sold for about Rs 3,000-3,500 per square feet in 2005 in a Mumbai suburb is currently quoting at about Rs 20,000 per square feet.