Investing in real estate? These 5 cities offer the best returns!

Prices in most areas have been stagnant but some regions are showing reasonable appreciation.

In the past couple of years, property prices in many parts of the country have stagnated, due to a shift in investment from real estate and gold to financial assets.

Nonetheless, real estate being a highly localised theme, it is still possible for the diligent investor to zero in on micro-markets that have the potential to offer at least 10 per cent return in the next one year.

Some places that experts think will be able to beat the sector’s sluggishness and offer reasonable returns include:

Hyderabad: The residential market here was stagnant for a long time, owing to the Telengana agitation.

“Now, that this political issue has been resolved and economic activity is picking up, the city offers good potential to buyers,” says A S Sivaramakrishnan, head, residential services, CBRE South Asia.

The high level of confidence in the market is evident from new builders from Bengaluru and other cities moving in, and the number of project launches rising in the past 12 months.

According to Sivaramakrishnan, the western corridor, comprising Kokapet, Nanakramguda and Gachibowli, offers good prospects.

Many projects in these areas have seen appreciation of eight-12 per cent in the past year.

Demand is good because the price range of Rs 3,700-4,500 per sq ft suits the pockets of double-income families from the information technology (IT) sector.

Ahmedabad: Two pockets, Kota and Chandkheda, offer good potential, according to experts.

“Kota has seen seven per cent appreciation in the past year, while prices in Chandkheda grew about three per cent. With the pace of economic activity within the city rising in the year to come, we expect these pockets to offer good appreciation,” says Anurag Jhanwar, business head (consulting and data insight), PropTiger.com.

Both areas have good liveability scores, which means that they provide adequate basic amenities and social infrastructure.

Bengaluru: Thanisandra Road in north Bengaluru offers potential for eight to 10 per cent return, according to experts.

“Prices here range from Rs 3,800 to 5,200 per sq ft. Travel time to the airport is 20-25 minutes, while the city centre takes about 30 minutes. The area is also close to Embassy Manyata Tech Park and Bhartiya City Tech Park,” says Sajid Mustafa Baig, manager, Silverline Realty.

Over the next five years, at least half a dozen IT parks will come up in north Bengaluru. The completion of the metro rail and monorail is expected to enhance the area’s attractiveness.

Kanakapura in South Bengaluru also offers good prospects. The current price of apartments here is Rs 3,800-6,000 per sq ft. The area is close to Electronic City and Bannerghatta Road.

“Kanakapura is witnessing good demand in anticipation of the Metro connecting it to MG Road by 2018, which will reduce travel time to the city centre to less than  30 minutes,” says Baig. 

Chennai: Madambakkam in south-west Chennai is poised for higher price growth in the short to medium term.

Prices here are still relatively affordable at around Rs 4,000 per sq ft.

The area has an inventory overhang of only 20 months. Tambaram (average price Rs 4,238 per sq ft) is also gaining in prominence.

Demand in these areas comes from people employed in the IT-ITeS hubs of Old Mahabalipuram Road and Grand Southern Trunk Road.

Mumbai: Thane-West and Badlapur have seen healthy absorption in the past 12 months. The momentum is expected to continue this year.

“The Thane-West area is accepted as a part of Mumbai. It is already well populated and is affordable with apartments available in the Rs 9,000-10,500 per sq ft. range,” says Jhanwar. Badlapur is another area where demand is high currently due to the affordability factor. 

Earn from capital appreciation

If you are looking for capital gains, stick to micro-markets where prices haven’t shot up too high.

Opt for those that are liquid (where transaction volumes are good) and inventory levels (unsold stocks) not too high.

The area should enjoy good connectivity with the city's economic hubs, such as IT corridors and manufacturing centres, with travel time not exceeding 45 minutes.

The area should also offer adequate social infrastructure. The developer should have a sound reputation for timely delivery.

Experts warn against entering the real estate market currently with a short investment horizon.

Says Shveta Jain, managing director, residential services, India, Cushman & Wakefield: “If you are investing in the mid-segment, say, in the Rs 4,000-6,000 per sq ft range, have a horizon of at least five to seven years to be able to earn sound returns.”

She adds that when buying in locations that are at a nascent stage, invest in those where infrastructure developments are planned.