There are two category of investors in Gurgaon - those who invested around five or six years ago and are still waiting for possession, and those who have always yearned to invest in this buzzing market, but could not because of the skyrocketing prices in the city compared to other satellite towns near Delhi.
With the market almost stagnant for a year and prolonged delays happening in project possessions, capital values in the secondary market have dropped by 20-25 per cent in the last one year, leaving both kinds of investors in a state of confusion. The dilemma for the first kind, who waited long enough for possession, is whether they should remain invested or exit the market. For the second kind, the question is whether the bottom of real estate cycle in Gurgaon has been reached and whether they should invest now or not.
Prices have certainly come down significantly from their peak, but timing the bottom in any market, not just real estate, is nearly impossible. By the time one realises that the bottom has been reached, prices start increasing. Thus, the bottom of real estate cycle is often determined when we cross that point. People who pluck prime properties at the bottom of this cycle are the savvy buyers.
Having said this, plenty of new projects and towers have been launched in Gurgaon in 2014 and in most cases, the base prices are well above the prevailing market rate in the secondary markets. Making a buying decision in such a scenario itself is difficult; moreover, the complexity of deciding to go with an under-construction or newly-launched project adds to the confusion.
In such a scenario, here is how to make a wise decision in case of Gurgaon’s realty:
Stay invested if you have holding capacity. If you are an investor who has already invested in a property, it would be wise to stay invested if you have the holding capacity, because it is difficult to get the best value for money.
Exit once your ROI is achieved. If your Return on Investments (ROI) has been achieved, go ahead and sell the property. There are several buyers in the market who are looking for properties in the name of distress sales. The primary objective of an investor is to make money, thus, make an exit when you have achieved your financial goal.
Invest in nearing possession properties for self-use. For the second category, whether it is the right time to invest or not depends on your investment horizon, finances available and type of property in which you want to invest. If you are planning to buy the property for self-use, the properties nearing possession may fit your requirements better. Gurgaon has a number of advanced stage properties available at attractive prices.
Invest in new projects for long-term investment. If you are planning to invest for a long term, new projects make sense. This gives you a decent time to arrange for funds and offers flexibility in payments. Moreover, a number of developers are currently providing 20:80, 40:60 or 50:50 payment plans where you need to pay 20 to 50 per cent upfront, with the balance paid at the time of possession.
Invest to diversify. If you already have a portfolio and have invested in properties in other cities, it is a good time to invest in Gurgaon. The demand in the residential sector is definitely going to be high in the coming years as Gurgaon has about 46 million sq ft of operational office space and another 20 million sq ft in the pipeline.
The bottom line is that it is always a good time to invest in property, if you are planning a long term investment. Moreover, the real estate market in 2015 is expected to outperform last year’s market due to various policy initiatives and overall improvement in economic sentiments.
About the author
Surabhi Arora, leads the research team in India and has more than 13 years of experience in carrying out multi-disciplinary research and analysis in the area of finance and real estate industry. Surabhi specialises in real estate economics, policies, commercial and residential real estate research with in-depth knowledge of market dynamics across major markets in India.