Real estate is an ideal investment vehicle, says expert

Real estate has “consistently proven itself as an ideal investment vehicle” and is an essential component of any investment portfolio.

For those looking for something that is a safe bet and does not call for deep knowledge of the business or intricate planning, real estate is the best option, said Arun Kumar, Managing Director, Casa Grande.

The rationale behind this optimism is backed by a fundamental factor – demand and supply, he said. India has nearly one-sixth the world’s population but just about three per cent of the land mass. Demand for land is growing in cities, in rural areas, and for industry and commerce. Prices are bound to be buoyant in the long run. Over a seven-year period, the capital appreciation can be15-25 per cent.

Evolving biz

Speaking at a seminar on the second-day of the Business Line Investment Opportunities Fair, a two-day event presented by the NSE, the Chennai-based real estate developer said the business is evolving into an organised and regulated activity. More people have surplus cash and this has contributed to a growing market. Policy support and a healthy housing loan market have contributed to the growth, he said.

Primarily, location is the key factor in the level of appreciation of value. The key market triggers are the availability of infrastructure, connectivity and potential to grow. For instance, when Casa Grande promoted a 250-villa project in Sriperumbudur, an industrial suburb of Chennai, the project was sold out in two to three days, he said.

Investors need to vet the land documents carefully, study the track record of the developer and be clear about the investment goal. Residential projects in the suburbs priced around Rs 4,000-5,000 a sq ft in a good location offer adequate head room for appreciation, he said.

Engines of growth

Real estate and construction are an indispensable component of economic growth – it is among the largest job generators, second only to agriculture, and drives the growth of over 200 industries, including large ones such as cement and steel. It accounts for about 5 per cent of the GDP.

While the mood in the real estate sector is sombre as of now (a trend that is likely to remain for a couple of quarters more), it is sure to pick up after that, Kumar said.

In the commercial space – office and industry – companies are in a ‘wait and watch’ mode because of the overall economic scenario. In the hospitality sector too, there is untapped potential.

Retail space

There is ‘more excitement’ in the retail space with the FDI policy on investment in retail in place. Malls are being developed across cities including in Tier II towns and cities. Space is in demand and this has attracted funds such as Blackstone Capital which has invested over Rs 1,200 crore in the last two years.

But the housing space constitutes the lion’s share of the sector.

Smaller cities such as Chennai and Bangalore hold huge potential as real estate investment destinations. Chennai, with its diversified industrial base, and Bangalore, with its reputation as a cosmopolitan city, are attracting investors. Planned satellite cities, improved connectivity and social infrastructure will further drive growth, he said.

balaji.ar@thehindu.co.in

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