The negative side of Property – FAQ’s

Transcript of Kartik Jhaveri’s Money Manager show on CNBC Bajar, dated 20-01-2015.

1. Why should you buy property?
   1. Property has always been and will always be a great wealth creator.
   2. Over the last 50 years or so property has delivered returns of about 15% CAGR.
   3. But one must be cautious as property is not easily divisible and suffers from quick liquidity.
   4. Buy property but only as much as you can digest. A good rule to follow is that for every 2 rupees in your networth you can afford 1 rupee of investment into property.

2. How much exposure should be there in Real estate properties?
   1. Best case 30:70 – others : real estate
   2. Worst case 70:30 – others : real estate
   3. There should not be more than 60-70% exposure in real estate property.
   4. If you have the entire or more weightage of your asset allocation towards properties then this will not give you liquidity when you will need it.

3. What types of real estate properties are good investments in India

                I. Residential Real Estate Investments:

                    a)   Houses, apartments, buildings, flats, pent house, villas, townships, vacation houses, farm house where family or a person lives in or keep it as                           investment property.

              II. Commercial Real Estate Investments:

                    a) Commercial real estate investment mostly deals with investments in office buildings.

            III. Retail Real Estate Investments:

                    a) Retail real estate investments consists shopping malls and other retail stores

            IV. Industrial Real Estate Investments:

                   a) It normally consists of storage units, or Industrial estate factory, mill or industrial land, warehouse

              V. LAND

4. How to decide? If it is for investing
   1. Check on rental yield
   2. Check on potential appreciation

5. Should we make use of the home loan rate cut?
   1. As the home loans will be available at a cheaper rate, it gives the opportunity to take home loan.
   2. But one should consider the allocation towards real estate in the portfolio before taking this step.

6. Why do you feel there is a negative side to property investments
   1. Most Imp – It is not divisible
   2. Most Imp – You may not be able to liquidate when you want
   3. Most Imp – You may not get the price that you want
   4. Most Imp – You cannot often sell a part
   5. You have to do upkeep and maintenance
   6. You have to do extra effort to rent if the place is outside your city
   7. You need to do extra effort to give / receive it as inheritance
   8. There is high risk of litigation with society, association, other members, neighbours, siblings etc.
   9. Natural calamity

7. What is the biggest or most popular mistake people do in property investments
   1. Greed take over
   2. People are overexposed to property
   3. They want to buy everything that is available
   4. It is an obsessive compulsive behaviour

8. What type of questions to be asked before considering for real estate investments?
   1. Is the title clear of the land on which the building is going to be constructed?
   2. The intermediate way is to ask for important documents like Intimation of Disapproval (IOD) and Commencement Certificate (CC).
   3. Check with builder about the actual price of the property. It would include the cost for utilities like electricity and water, parking space, various taxes, any legal charges and registration charges etc.
   4. Discuss about carpet area, built up area and super built up area.
   5. Request information about the undivided share in the land which has to be registered before commencement of construction
   6. You can ask for floor plan so you will get idea about surrounding & spacing.
   7. Try to know when the project will be completed and which will be the tentative date of possession of property
   8. Ask for Occupancy Certificate
   9. The most important document is “Completion Certificate “