Rent out those second homes

Source: High Rise

Have you entered the property market in the current boom scenario and bought a second home? You must be wondering if you should cash in and sell, or hold on to the property to generate rentals?

High Rise finds that if you have made the investment in or around an emerging business district, the spiralling rentals will ensure you get sound returns. 

Pradeep Mujumdar, Administrative Manager of Ciba Speciality Chemicals is baffled with Mumbai's spiralling rentals. His company needs accommodation for foreign consultants they bring in on a regular basis, and currently this is proving to be a tough task.

“When we booked a semi furnished apartment one year ago, the rent per month in Powai was Rs 45,000, plus Rs 1 lakh deposit. Now, I have recently done a deal where the refundable deposit is Rs 7 lakh and the monthly rental is Rs 85,000. The increase and escalation clause is 10% after 12 months, and most of the licensees are insisting on giving the termination clause because of the increase in market prices,” informs Mujumdar.

“Reliance retail has taken up 50 odd flats in Hiranandani Gardens in the past 3-6 months, says Sandeep sadh, CEO, mumbaipropertyexchange.com.

With sale values going sky high and home loan interest rates being revised upwards, experts feel that potential homebuyers may put off plans to buy homes. On the other hand, Landlords make the best use of this situation, since a corporate is always willing to match the amount that the owner commands.

“Let's assume you were wise enough to pick up a flat at Godrej properties in Simplex Mills at Rs 5,000 per a sq ft, where the value today may be Rs 12,000 per sq ft. You get a yield of 6%, which will relate to the Rs 12,000 per a sq ft. But, if you were to relate it to your original investment of Rs 5,000 per sq ft, it will be much more,” chips in Pranay vakil, Chairman, Knight Frank India.

So, in today's property market, experts believe that holding onto a second home you may have in, will certainly pay off.