Where to buy real estate?

With prices and interest rates always on a high, real estate has been a hot topic since over a year now. However, when necessity dawns and buying is inevitable, the next big question that lingers on your mind is "Where should I buy?" Moneycontrol.com offers you experts' advice on this and many other queries.

Below is a verbatim transcript of Knight Frank India's national director of residential agency Anand Narayanan's exclusive interaction with moneycontrol.com users. Q: Hi, I want to buy a plot on Gurgaon Dwarka Expressway at Rs 40000 per yard. What do you think would be the return after five years? Narayanan: Dwaraka is expected to see significant investments into improving its connectivity to Gurgaon in the next two to four years. Hence with a five-year perspective this area can be expected to generate a 15-20% annualised returns. Q: What should be the approximate price of a flat at Juhu Gulmohar Cross Road No 12 under construction building with possession in June 2012? Narayanan: That depends on the developer and the actual location and features of the product. But anything beyond Rs 22000 per square feet may be expensive with little value on the table for the buyer. Q: Your views on weekend houses? Are they worth investing in? Can you please suggest some good plots near Mumbai? Narayanan: Weekend homes are a lifestyle choice. Investment logic in weekend homes is usually not as compelling as they may be in first homes. Liquidity (meaning re-sale of the home) may also trouble. I suggest that if your investment capability is under Rs 5 crore, then it makes sense to invest in gated communities rather than standalone land. Alibaug and Pavana are my strongest bets. Q: Which looks better in long-term and rental point of view�Gurgaon Sector 92 or Noida extension? Narayanan: Gurgan Sector 92 is my choice. Q: Is it the right time to buy an apartment in Bangalore, will there be any price correction in this year? Narayanan: Significant price corrections aren�t expected in Bangalore. At the same time, there is no robust upside either in the next six to nine months. So if your liquidity situation is reasonable (job, EMI commitments etc), then I recommend that it is in fact a good time to buy in Bangalore. Q: Which are the three best tier-II cities where we can expect a return of more than 25% over next three years? Narayanan: Indore, Kochi, Alibag and Pavana, with the latter two being second home destinations today but have the potential to become Mumbai�s extended suburbs in the next seven to ten years. Q: I had booked a flat with a Rustomjee Builder in Malad West Adarsh for Rs 5000 per square feet and I am getting Rs 12000 per square feet now. So should I sell it or rent it? It was purely for investment purpose. Narayanan: Yes, you should sell. Look at other under-construction opportunities. It�s a good time to buy now in Mumbai. There is no immediate upside, but, because of low sales velocity, there is a good chance of making a good buy. Q: I am looking for a residential property at Navi Mumbai, is this the correct time to invest there? Narayanan: Pockets of Navi Mumbai have been built on a very speculative bias, especially locations such as Khargar. Vashi is a good location due to commercial and social infrastructure and its proximity to Mumbai Central. Panvel too is a good bet, by the sheer logic of its capital value still being sub-Rs 4000 per square feet and the prospects of the SEZ airport and other developments expected in the next five to eight years. Q: Do you expect prices in central suburbs to see any correction in the next six to nine months. Also, from an interest-rate point of view, is this a right time to buy on loan? Narayanan: I do see some more upside in interest rates but it may be capped at another 150 basis points. Long-term interest rates in the country will move downwards as the rupee strengthens and inflation moderates. _PAGEBREAK_ Q: In Mumbai suburbs, a 2 BHK flat is costing more than Rs 1 crore. Do you see whether it is a hype created by builders or brokers and whether it will burst? Also, what is your suggestion to buy a flat for Rs 1 crore (and pay EMI for next 20 years) or just stay in a rented flat (paying Rs 25000 a month)? Narayanan: Mumbai has a very strong demand base and restricted supply base. Hence, there is always an upward pressure on prices. While I see the risks of price corrections there in the market, I don�t expect it to be a bubble burst. A 10 to 15% downside is there in the market in the next six to nine months if the volumes don�t pick up. Your primary home can be owned, rentals move up in absolute terms over years at, at least 10% per annum. Q: What is your view on the overall Gujarat property market? Narayanan: The market in Ahmedabad is supported well by social, commercial and leisure infrastructure and hence there is a robust fundamental to support long-term capital growth. Q: I bought an apartment in Commonwealth Games Village, Delhi. The handover of the property has not happened still. Is it worth waiting or should I sell off? Narayanan: Worth waiting, as handover, I believe, is expected shortly. Q: What are the prospects of a 2BHK apartment in electronic city, Bangalore? Narayanan: Good from a rental perspective. Q: Do you expect prices in Parel to rise sharply and be at par with that in Lower Parel once the Monorail project is completed? Narayanan: There is not much arbitrage left between Parel and Lower Parel. But I expect un-catered demand to move towards Sewri and Mazdgaon in the next three years. The price differential between these two locations will narrow down. Q: How does Mulund (a central suburb in Mumbai) look from an investment point of view? Narayanan: The coming decade in Mumbai will belong to eastern suburbs. A disproportionate amount of resources of the MMRDA are going toward east and west connectivity, as opposed to the north and south infra bias of the past three decades. Be it the metro, JVLR, SCLR, Eastern free way, elevated freeway from Colaba to up north, through Sewri and Chembur, the mono-rail etc. Mulund is a good end-user market and will be supported well with upward bias on prices in the coming few years. Q: What are your views around investing on Golf Course road (DLF Park Place in particular)? Narayanan: Great location. Golf Course road and Golf Course extension are the premium locations in Gurgaon and one can expect significant demand for housing in this micro market, which will keep prices well supported. Q: Which is the best city in Tamil Nadu for real estate investment? Narayanan: Chennai and to a certain extent Coimbatore. Q: Where can we buy land in Chennai now? Is OMR a good option? Narayanan: Look at options beyond Mahabalipuram. The nuclear power plant and the expected dry dock along with well established ECR may support development to reach here fast. Prices too are not as aggressive as it is in the Sriperumbudur belt. Q: I entered at Rs 15000 per sq ft last year. What kind of rental can I expect for 1500 sq ft 2BHK apartment? Narayanan: If it�s Mumbai, at Today�s capital value, rental yields range from 2% to 4%. If it�s Gurgaon or cities like Bangalore the rental yields are slightly higher at 4% to 6%. Q: Do u think Mumbai with its sinking infrastructure would continue to be the residential and commercial hotspot in the years to come or would it be taken over by upcoming cities like Bangalore or Ahmedabad? Narayanan: The rate of change will be faster in other cities. But I don�t think Mumbai will lose its shine, if only governance can improve. Q: At this market valuation is property an investment bet? Narayanan: Not in the near term. But long-term outlook is robust.