BQPortfolio: Should Niyati Parikh Buy A House In Mumbai As An Investment?
The low rental yield in Mumbai makes investments in residential real estate less attractive than it used to be.
BQPortfolio speaks to citizens from across India about their financial goals and helps them access expert advice on how to achieve them.
Niyati Parikh is facing a conundrum that’s quite common in India’s maximum city. Her primary financial goal is to buy a house worth Rs 60 lakh in Mumbai in the next five years.
She’s aware that given the fairly high prices of residential real estate in the island city, she will probably have to settle for a house in the suburbs. Parikh’s also not sure whether she would choose to stay in this house or treat it as an investment.
The conundrum is common because by and large residential properties in Mumbai are among the costliest in the country. At the same time, rental yields are usually 2 percent of the price of the property. So, if a house costs Rs 1 crore, the annual rent charged on it would likely be close to Rs 2 lakh.
Also, prices haven’t risen much over the past five years and are unlikely to go up in the near term based on the unsold inventory. So, a potential investor has to consider the cost of buying the house, which includes the interest cost on a loan most would have to take, and the maintenance cost per year. They would then have to weigh it against the potential for appreciation and the rental yield.
Kartik Jhaveri, director at Transcend Consulting, tells Parikh what she can do to buy the house as well as weighs in on whether she should purchase the property in the first place.
Watch the episode of BQPortfolio here to know more: