The real estate market has been plagued with lower rental returns with poor capital appreciation, especially in the last couple of years or even in the preceding three or four years. As India is into more of industrialization with an increasing number of jobs being created, attracting more manpower, rental solutions have increasingly been redressing the housing problems.
Although houses for rent is not scanty in supply and there is no shortage of homes to be rented, but the rental yield has shown some slump in the unpredictable real estate market conditions. In such a situation, optimizing the rental yields has become a continuous challenge along with thrifty capital appreciation, especially in the last three or four years, which have hurt the interests of the investors. However, the real estate market has reasonably digitalized with new disruptive technology reducing the cycle time for rent and sale. Even then, the real estate investors are still puzzled about where to invest to maximize their return on investment.
Undoubtedly the beauty of real estate investment is, that it has a two-sided returns like monthly returns and capital appreciation making it one of the most lucrative options for investments out of the heard of options to invest. Although the sector may be facing some slump, data suggests that the return on investment is more from the affordable homes for sale than the mid-segment or high-end segment.
Research studies and surveys suggest affordable homes in Bangalore or other cities where there is a perennial demand for housing varies significantly in yielding higher rental returns in proportion to their capital values. As the affordable homes for sale are within the average budget, the yield on investment is comparatively more. Studies suggest that properties which are priced below Rs 6, 000 per square feet have a yield in excess of 3%. On the contrary, the same study indicates that properties that are priced more than Rs. 6,000 per Sq. Ft. have a yield between 2.4% to 3%. The experts thus suggest that properties for rent with the investors’ desire to optimize the rental return should be from the affordable property bracket.
Although the yield from the affordable properties may be comparatively more and with the broader realty market being more or less flatter in nature, there are few micro-markets that have more promises than the rest. Although the studies and the survey reports say that throughout India, the rate of returns on investment in real estate has been hovering around 3% per Sq. Ft., few pockets in the metro cities have been yielding more than 4.5% too. The surveys reveal that the properties with lower cost and prices have yielded more returns than the high-priced ones. Metros like Kolkata, Bangalore, and Hyderabad have shown such instances where the rate of return has been more than or close to 4.5%. Other cities like Ahmedabad and Ghaziabad have also shown such trends as well with higher rental yields.
Talking about Bangalore, the same trends have been exhibited, with the rental returns being more than the national average. Let’s find out the areas that have been showing more returns than average in the IT capital of India.
Whitefield being the house of numerous IT Parks and companies are most in-demand by the working population. That is precisely the reason why the flats for sale in Whitefield escalate in value every year at a steady rate. The rental prices also at Whitefield increase at a steady pace with the demand rising in leaps and bounds with the increase in the office space absorption in the area.
Being well connected to the central business districts of the city and with a superb connectivity, the area’s social infrastructure is also increasing in leaps and bounds too adding to the demand of the area. The area is also blessed with the proximity to the Old Madras Road, Outer Ring Road, and Metro rail connectivity along with railway connectivity too, which adds to its attraction.
The area has a lot of projects undergoing construction or read-to-move-in flats for sale in Whitefield built by all classes of builders, including the builders of the affordable sector. Various sources say, the average square feet rate of Whitefield is somewhere around Rs. 5, 253, with a 33 % increase in the prices of properties annually. Undoubtedly, the area offers many options with numerous projects offering affordable flats for sale. The ones offered are under-construction flats for sale along with many ready-to-occupy flats for sale as well.
K R Puram
K R Puram is another locality with a high increase in the capital values of properties with a high demand for rent, indicating high rental yields as well. K R Puram, along with the adjacent areas, has also witnessed an increase of 27% in the rise of property prices over the last six month period. KR Puram, which is blessed with the metro and railway connectivity and being close to the IT hubs with many IT parks nearby along the ORR, is of high demand by the working population. Of late, the statistics say that the area has witnessed price inflation of 27% in the property prices over the last six month period. The projects under construction, along with the ready to move in flats for sale are also in plenty in the area for the investors.
Bellandur being close to the IT offices on the ORR has tremendous prospects with superb connectivity. The areas surrounding Bellandur are KR Puram, Marathahali, Sarjapur Road, and HSR Layout, which are all crowded by the IT companies and numerous IT Parks. Various sources say that the area has increased in property value by 27% in the past six years. The per square feet rate of property in the area is Rs. 5, 835, according to real estate sites with, of course, varying property prices. There are plenty of properties in the affordable segment, too, with numerous affordable flats for sale.
Electronic City in South Bangalore is undoubtedly one of the most prominent IT hubs of not only Bangalore but of India as well. Employing over 1 lakh people, Electronic City employs a large proportion of the IT and ITeS workforce with the presence of large multinationals and major IT companies of the globe. Over and above that, the area is not only increasing in infrastructure, but along with it, rapid expansion is also a common phenomenon with increasing absorption of office space in the area.
Rapid pace of development of the area essentially accentuates the demand for housing and homes for rent in Electronic City. There are numerous flats for sale and under construction apartments in the area, too, owing to the demand for accommodation and the disposable income among the working population in the area. The average price of homes in the area would cost around Rs. 3, 100 to Rs. 5, 600 per square feet, although there are affordable flats for sale as well, costing less than Rs. 3, 000 per Sq. Ft. as well. Among the builders, there are famous developers with premium homes and affordable flats for sale, also with all luxury amenities which are built by branded builders and real estate developers.
Situated in the eastern part of the city, Sarjapur road is another area that is high in demand by the IT and ITeS workforce owing to numerous IT Parks and large multinationals in the vicinity. Apart from the numerous companies present in Bellandur, which is close by to Sarjapur road, there are many IT Parks being constructed on Sarjapur road too. The demand for apartments for sale and rental accommodation on Sarjapur road and Sarjapur is already high and can be anticipated to be even higher in the recent future as well.
Major IT Parks of Bangalore like Ecoworld, Cessna Business Park, and EcoSpace are easily accessible from Sarjapur road along with a very improved social infrastructure in the area that boosts the demand for apartments for sale and rent in the area. The area is easily accessible to Koramangala and HSR Layout too. Property values here range from Rs. 4,500 to Rs. 6, 300 per square feet, although there are enough affordable apartments for sale in Sarjapur and adjacent areas.
Ideas to Maximize ROI
Bangalore is a city where there is a reasonable and steady increase in capital appreciation year-on-year. Investors looking for rental yield can choose to opt for affordable properties for sale in the above-mentioned areas. Statistics and market studies reveal that the returns on investment on a 2-BHK flat are more than the 1-BHK apartments for sale.
Buying a 3-BHK can also be a good option as such flats can be rented to single professionals, students, and bachelors where there is enough employment generation and demand for housing. Whatever may be the ultimate intention, Bangalore is on the path of massive expansion with property prices on the rise steeply, and with the Metro railway being fully operational, the prices of properties would surely increase in leaps and bounds. Looking into these factors and the current market scenario of the Indian real estate, when the prices are just taking an upward turn, this is probably the best time to invest for the highest return on investment.