Mint, Hindustan Times and NDTV, bring you a personal finance show, Let’s Talk Money. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV.
A special edition of the show, excerpts from which were also published last week, had a panel of experts: Anshuman Magazine, CMD real estate consulting firm, CB Richard Ellis; Harsh Roongta, founder and CEO of apnapaisa.com; and Ramesh Damani, a stock market expert.
Brijinder Monga: Prices of residential properties in Delhi have seen a sharp rise lately, but not in commercial or retail. Is it still wise to invest in commercial property?
Magazine: In certain markets prices have gone up really high and I don’t think this is a good time to enter, but there are still good opportunities to invest in commercial real estate if you look at retail malls, where there is maximum opportunity to invest for an individual. Both office and retail space is going to grow significantly and in the medium to long term, it will do well.
Halan: Can you give us a rule of thumb that when you evaluate a property, we can say it is too high right now?
Magazine: I think it’s really difficult to get a thumb rule.
Halan: Is there a yield below which you should not buy, 1%, 2%, if your yield is less than this, its overvalued?
Magazine: If you look at India in the office market, India has one of the highest rates. It’s 10% plus, if you look at Mumbai. Delhi is still low, Mumbai has higher yields. But in India, people don’t invest on the basis of yield in residential because there is a capital appreciation. So for example, in Delhi, yield may be 2-3%, but the capital appreciation will be higher than anywhere else. If you look at capital appreciation point of view, then yield doesn’t make sense at all, so in residential, in India, yields are not relevant.
Halan: Is there a yield below which you should not buy, 1%, 2%, if your yield is less than this, its overvalued?
Magazine: If you look at India in the office market, India has one of the highest rates. It’s 10% plus, if you look at Mumbai. Delhi is still low, Mumbai has higher yields. But in India, people don’t invest on the basis of yield in residential because there is a capital appreciation. So for example, in Delhi, yield may be 2-3%, but the capital appreciation will be higher than anywhere else. If you look at capital appreciation point of view, then yield doesn’t make sense at all, so in residential, in India, yields are not relevant.
Nayan Goel: These days’ sales executives from different banks approach people where they are selling commercial properties. They ensure a return of 10-12% for the first three years. And the property is likely to be rented thereafter. Is it viable to go for such investment options?
Magazine: I think one should be very careful in investing in those properties because at the end of the day, you are talking about a developer giving an assured return, which means there is no tenant as of now and there is a possibility that you will get the property after three years and you may not be able to lease it. So be careful.
Halan: It’s an unregulated market to a certain extent. Even if they give you post-dated cheques, what is the guarantee the they will get encashed, so I would be careful about these guaranteed-return projects.
Natarajan: Harsh you had experience, a customer having a problem with land, there are so many stories of builders promising a lot and not delivering.
Roongta: As Monika said, the market is not regulated, although there are talks about being a regulator.