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There are three main reasons on why people invest in residential property
1. Buying as an Asset
A person's motive on buying a residential property is to have an asset on his name. To make sure as to have some valuable property for him and this might help him in his unwelcomed circumstances.
2. Investing for rental returns
Be it a small town or a posh locality in Chennai. There is still a high demand for housing units. So finding a potential tenant is an easy task for any homeowner in Chennai. But the fact that rental incomes are completely based on the location is inevitable. However, there is always a possibility of earning through rents if you have a residential property. Residential properties like apartments, individual houses and villas in Chennai will positively fetch you good rental income even though you are not ready to occupy.
3. Span of living in a city – How long are you going to stay?
Imagine you are moving into Chennai for an official purpose. Considering the time period of how many years you stay here matters to decide on renting or buying. If you are likely to stay here for more than 10 years, then buying a residential property is a wise choice. If it is less than 10 years, say 2 to 3 years, then staying as a tenant is fine. Because the rent you pay for 10 years can save enough money by buying a house. Also, there are other expenses to spend while staying in a city. So buying a house is always better in this scenario. This is another reason why individuals buy a residential property in a city.
Advantages of investing in a residential property
The initial cost of investment
The initial cost of investment in residential properties is cheaper than commercial properties. An individual availing loan for a residential property is also less than commercial property. The limit on availing loan for residential property is 80% while commercially is only up to 60%.
A residential property has the capacity of providing a regular stream of rental income throughout the year. Imagine you are buying a 1 BHK individual house in OMR. The rental income expected from this property is about Rs.7000 per month. If it is a 2 BHK or 3 BHK independent house, then you could expect around 15 to 20 thousand rupees per month. Additionally, there is a noticeable advantage in buying Gated community villas in OMR , ECR, Anna Nagar and other areas. The rent you earn here is more when compared to other houses. A 2 BHK villa in a community would fetch you around 25 to 30K of rental income including the maintenance of the community. And this might change according to the locations you choose in Chennai.
Also, a very important thing every buyer must know if his motive completely relies on rental incomes. The rental income would improve gradually over a period of time. The rental income would get pushed higher in the future after buying a property in a particular location. The location where you buy an asset is the major catalyst that revolves around how much rental income yields after a period of time. The more time passed after bought, the more is rental income.
The criteria for buying property in Chennai are the price appreciation. People certainly expect the prices would reach higher in future. Currently, the outskirt properties in Chennai are worth more than the actual price when they bought it. For instance, a property worth of 30 lakhs in the outskirts is worth more than 50 lakhs in the real estate markets today. This is a result of advancements happening in Chennai lately.
Example: Mr Bora bought a property on the outskirts of Chennai, Kelambakkam during 2005. The cost of an individual house which he bought at that time was Rs.30 lakhs. And presently, it is worth twice the amount which he invested that day.
There is always a price appreciation in a locality where you can confidently expect certain developments in the future. Mr Bora made a right choice by choosing Kelambakkam at the time. And now Kelambakkam is experiencing so many developments in the recent years. There are so many commercial developments happened during these 12 years. This means the price has got way too high for the property. Additionally, the rental income would also have increased by now.
There are other advantages of buying a residential property
• The property can be passed on to the next generation after your death. The value of the property would be higher and benefits for your child in future.
• Be it a villa or an individual house, you can add additional storeys in the future.
• You can even transform into a retail shop or for other business purposes in case of individual houses.
• Joint families can live together and save the rentals and housing costs.
• Most importantly you can rent out the storeys above say, 1st and 2nd floors and earn even better in the future when real estate market hits high.
While there are so many options to invest the resources, the real estate is the feasible industry to invest for all the people. Factually, residential properties yield you the best and cost you less initially than the commercial properties.