-Sanjeev Kathuria, Founder & CEO, Torbit Consulting

We are made to believe “Zameen Mei Paisa Dalo Paisa Banta Hai” (Investment in land pays). Yes, it pays. But what is important is how much does it pay and in how much time. 

Economists will come up with terms like ROI: Return on Investment or IRA: investment Rate of Return. They will also argue, comparing return on investment in real estate vis a vis other asset classes like gold, stock market, metals etc. Especially keeping in mind that the invested capital not just grows, but it beats the inflationary return.

Long term investment in any asset class in India typically gives 12-15% return year on year, compounding wealth. In real estate, short term returns in any vertical- residential or commercial is absolutely not possible until and unless you invest at the time of inception of the protect where you enter as a seed investor. This is the time when developer is happy to sell at cost-on-cost basis as he does not want to borrow costly money from banks or private equity investors.

But this is a high-risk high reward proposition and mostly possible with mid-size regional developers for a safer mid-term investment cycle. One should wait for the project license from RERA before making any investment. Moreover, one should invest at the time of project launch in a construction-linked payment plan (CLP) or any subvention plan like 10:90 or 20: 80 or 30: 70 40:60. Based on the terms of payment, you will have a 20 percent IRR to upwarrds of 30% return on capital employed. 

Typically, a residential or commercial project of a reputed developer should give a 100% return from the start of project to the time of delivery provided you carry out all necessary checks before deciding to invest.  

Key Factors to Consider Before Making Investment 

• Location -Check the status of physical and social infrastructure in and around the project location
• Economic development that will drive the region
• Developer and his credentials -track record of timely and quality delivery
• Product details
• Resale policy and transfer charges.
• Size of the project (Inventory size should be easy to liquidate).
• Investor – friendly and broker- friendly organization.

Though these checks are not any guarantee, yet these will mostly help you protect your investment and make it grow. I happen to come across some projects recently where everything was right but the location and the asking price were not relevant and the investors are stuck with no exit in sight. So, for safe and profitable investment, always keep in mind that real estate is first a science and then commerce.