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Economy Nov 6, 2012

How to spot that ideal investment property

By Kishor Pate

Investing in real estate is a time-honoured method of achieving financial success.

Throughout the ages, investment property has helped a lot of people make a great deal of money - sometimes quickly, sometimes over the long term.

Those who invest for the short term are generally known as property speculators, and they play a dangerous game. Long-term property investment is for forward thinkers who have an investment horizon of at least five years. The objective of a long-term property investor is to buy a property at a low price and sell it at a higher price. To be successful at this, one needs to know what is going to happen in a certain location over the next few years.

Invest in a growing location

You will need to invest in a growing location, not an established one. This is especially true if you are a middle-class person living off a middle-class income. There are two reasons for this. First of all, properties in established locations cost a lot of money. At the same time, their long-term investment value is lower. The reason for this lies in the nature of the real estate market. The costly (or 'prime') areas gained their value over a certain period of time but will eventually stagnate or even down.

Realty gains in value with new infra projects

Real estate gains its value because of new infrastructure projects, shopping centres, public transport facilities, etc.

Real estate gains its value because of new infrastructure projects, shopping centres, public transport facilities, etc. These can happen only in new growth areas, because established areas tend to have reached saturation point in these respects. If you look at the central locations of Pune, you will see that nothing more can happen there. These areas are saturated. In many of them, residents are facing a lot of problems because of overcrowding, lack of parking, open spaces, playgrounds for their kids, pollution and traffic clogging.

Buying investment property means buying it where people are going, not where they have already been for generations.

Even with the best of intentions, the city planning authorities cannot do anything to make life better for them - there is simply no space left. Long-term property investment means buying real estate in an area while it is on the rise - not when it is in saturation or decline mode. Buying investment property means buying it where people are going, not where they have already been for generations.

A hot property market is one where there are upcoming changes in the infrastructure, and where home-buyers are headed. In the case of Pune, this would especially include areas like Undri, Baner, Kharadi and Wagholi.

Infrastructure can include things like major highway construction and shopping and entertainment facilities. Look for areas that have a lot of employment options, because people always want to live close to where they work.

Also keep your eyes open for areas where large corporations are relocating or already exist and have room to expand. When this happens, the real estate market in that area will boom due to demand for housing and small businesses. Business is one of the most reliable drivers for real estate prices.

by Kishor Pate

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