Trends in Profit-Yielding Real Estate Returns in Major Cities

A glance to the future

Current market conditions suggest that real estate investments will continue to perform well in the foreseeable future. The following economic and structural factors are expected to fuel investor appetite for real estate and drive returns:

Low interest rates: Real interest rates in most developed markets are negative and have been for some time. This has had a profound impact on every asset class, including real estate. Investors of all types have been forced to look outside of traditional sources in their search for yield. Many investors have turned to real-estate as an alternative to investment grade fixed income investments that pay lower yields. While the Federal Reserve has begun raising interest rates in the U.S., rates remain near historic lows and will likely continue to drive flows into field in the future.

Low unemployment: The unemployment rates in most developed countries have now recovered to pre-crisis lows. This greater level employment has caused an increased demand for the market, and in particular in major cities. This demand will likely to continue to fuel returns for the foreseeable future.

Low inflation: In addition to low interest rates, a persistently low level of inflation over the past decade has meant that high nominal yields paid on property investments have translated into real spending power. Additionally, many investors view it as an inflation hedge, since rent can be raised if prices rise.

Population growth: Because populations continue to grow every year, investment in new projects must be made in order to supply larger future populations. However, new construction often fails to meet the needs of growing populations, leading to rising real estate prices and increased rent. Thus, population growth provides a consistent level of support for investments.

Improving consumer balance sheets: Leading up to and following the 2008 global financial crisis, consumers in most Western economies were extremely overleveraged. However, consumers have now regained financial health. Strong consumer balance sheets will allow consumers to obtain the credit needed to purchase properties, generating additional demand and causing prices to rise.

Regulations: Real estate investments enjoy some of the lowest reporting requirements of any asset classes. For example, international investors hoping to open a bank account or purchases stocks and bonds in the U.S. must fulfill extensive “Know Your Client” (KYC) and anti-money laundering requirements prior to doing so. To complete these requirements, the financial firm that the client is opening an account with must verify their identity and ensure that all incoming money is originated from a legitimate source. This same investor can purchase a condominium in New York City without any of these requirements. For this reason, real estate in major cities has become an attractive investment for foreign investors hoping to discretely move money away from their home countries. The most notorious example of this practice is the insatiable appetite for international real estate of the Chinese upper and middle class, members of which have poured billions of dollars into the market in the U.S., the U.K., and Australia in order to circumvent the Chinese government’s strict capital controls. This behavior is almost certain to continue in the future, increasing demand for investments

Increased retirement age: Because of social security and other governmental budget shortfalls, many countries are considering raising the legal retirement ages. This will increase the size of the labor force and prevent older citizens from leaving major cities, bolstering demand for urban properties.

Urbanization: The populations of most major cities are growing at higher rates than those of their overall countries. This trend is likely to continue as millennials abandon smaller towns in pursuit of economic opportunities in urban hubs. New developments are often unable to keep up with this growth. Rent and prices must rise in order to offset this supply shortage.

Co-working products: Co-working products have created a new use for real estate that appeals to a wider audience than traditional office leases. This has unlocked a new and growing source of demand that must compete against conventional sources for a limited supply. As this trend continues, real estate returns will be bolstered by this additional demand.

Gurugram “The Millennium” City of India, Real Estate Overview

“According to a recent report from financial express Gurugram share 13 present of total sales of properties across top-nine cities in Q4 FY’17 ”

Gurugram is better known as the millennium city of India. It is a city located in the state of Haryana and also falls under the national capital region. It isn’t incorrect to say that Gurugram is one the fastest growing cities in the nation today, which is why it has become the hub of industries and Information technology in present times. Not only Gurugram has the highest literacy rate but also stands as the city with the highest literacy rate in Haryana, at 84.7 percent. The per capita income is also the third highest in India owing to its ever-growing industrial nature and increasing employment.

Gurugram, hitherto known as Gurgaon has developed to become one of the front-running cities of the nation in terms of its infrastructural growth and establishment of connectivity with other cities. It has its own self-financed metro and developed metro connectivity to neighboring cities such as Delhi. This is not just facilitating smoother commutation for people but also bringing more and more workforces to the city. As a result of its infrastructure and availability of space both for the commercial and the residential sector, a lot of realtors have shown the keen interest in the city’s rapidly developing real estate.

The major expressways in Gurugram along with the Rapid Metro, which is likely to extend to the Golf Course Extension Road in the near future are serving as major motivations for people to settle in the city. The proximity to high-class retail stores along with easy access to necessities such as schools, hospitals, shopping marts, malls, police station etc is completely fulfilled by Gurugram at all its locations. These amenities are not fulfilling people’s everyday requirements but also catering to their luxury needs at the same time.

The government policies for the real estate sector in Gurugram have a huge impact on the real estate sector of the state. The reduction in circle rates has come out as the major motivator for both people and builders to come to the city and collaborate with new and innovative projects. Considering other taxes, there are rebates for defense personnel, former servicemen, war widows, widows of freedom fighters, etc. Apart from that RERA Act and GST have further led to boost in the real estate sector of the city, thus encouraging more and more people to look towards the city’s developing projects.

The Properties in Gurugram are building focussing on the living requirements of both affordable housings as well as luxury living. With rising number of jobs in the city, it was best to come up with suitable projects nearby working areas that not only saved a lot of time for the people but also gave them a security of having their own home in a NCR city. DLF builders own a large tract of land in Gurugram, and this is seen as one of the major reasons behind the city’s growth. It is not hard to spot large shopping malls, many large five star hotels, golf courses and outlets of leading fashion brands and MGF Megacity Mall, Metropolitan Mall, Plaza Mall, Ambience Mall, DT Mall are the popular malls in the city. Along with bringing all sorts of joyful activities to the doorstep of the buyer, Gurugram has many projects to offer at enticing prices.

How To Inspect A Property Before Sale

Open inspections are a great opportunity for homebuyers to check the condition of the property they are targeting to buy. Buyers and investors should find time to personally visit the property to be able to make a guided buying decision. In fact, it would be a good idea to take down notes to keep track of the features that impress and don’t impress you.

A personal inspection of the home you are planning to buy can be done not only once. You can make several visits and while there, take the opportunity to snap photos of the different parts of the house. Just make sure to ask permission from the real estate agent before doing so. Further visits should be able to give you a real picture of the property’s condition and know its major and minor problems.

So what you should you look out for? Here are things that you need to be aware of.

Check for any obvious cracks in walls. Cracked walls can signal certain issues such as the house is sinking or needs the replacement of stumps. If large cracks are present, it would be best to get advice from a structural engineer.

Look for signs of leaking in gutters and eaves. Leaking gutters including roof that sag and broken roof tiles need repairs or replacement hence, it would be wise to ask about it from your real estate agent.

Also, look for obvious signs of recent patch ups or fixes that may be masking other issues. For example, peeling paint is a sign of moisture in the area while bubbles on paint can mean the presence of termites.

Find out if the floors are even or under foot. Floors that are sloping or bouncy could indicate the need to replace stumps.

Check if the bathroom or laundry has a smell of mould. Walls that have moulds signal excessive moisture in the area.

You may also ask the real estate agent or the seller for a due diligence checklist. They should be able to provide this checklist to prospective buyers at open for inspections.

Keep in mind that a home inspection is very important as it can tell you the defects of the property that could affect its value and the cost it would entail to repair them. This should not be taken for granted if you are buying a house to avoid a costly mistake.