Did you put money in real estate during the past year or so with the express objective of gaining through capital appreciation? If yes, depending on a number of factors, you might have a bit of a problem on your hands. For, over the past year, the gains have tapered off.
The decision
The extent of the problem depends partly on your investing horizon. If you had taken a long view and plan to hold it for a decade or so, there is nothing to worry about. While there may be a few ups and downs, returns from real estate have been next only to stocks in the long term.
If, however, you were looking to sell off your property within a year or two and earn some capital gains, that plan may need some tweaking. As mortgages and prices continued their upward journey, since around the middle of last year, end-use buyers started staying away in larger numbers. Merrill Lynch, for instance, estimates that sales volumes in the NCR are down 50-70 per cent from last year.
Whither prices? Prices, too, have softened in areas of high speculative interest as property got priced out of the market. Smart investors like Delhi NCR lawyer Dheeraj Seth, 31, sold his Gurgaon house when real estate was still hot and parked the proceeds in another property that is under development.
In January 2008, the stockmarket tanked, pulling down sentiments, and real estate in its wake. Experts say prices will climb 20-30 per cent off their peaks. Those who have held on to their investments, have clearly missed the top this time around.
Over the hill? "Short-term investors in markets where the values have peaked could explore exiting," says Sanjay Dutt, joint managing director, Cushman & Wakefield, a real estate consultancy firm.
Has the price of your property passed the summit? The following three checks will tell you. First, if prices in the area have gained 100-200 per cent in the past year, says Dutt, they are unlikely to rise substantially soon. Second, if the area has lots of speculators, then supply will continue coming into the market and keep price rise in check. Third, if a property with better location or amenities are coming up nearby, that will keep yours off the coveted list. If any of these is true, sell.
Once you take the sell decision, you have to find the best deal.
The process
The channels. Once you decide to sell, cast the net wide to reach as many prospective buyers as possible. For that, tap both conventional as well as online channels. Contact real estate agents and tell them your asking price and by when you would like to sell. If a project is not sold out, you can also approach the developer's office.
Insertions in newspaper property classifieds also help and can cost up to Rs 1,500. "If it's a ready project where people are living, promote the property within the building complex," says Dutt. There would be people who could pass the word to other interested parties. The same holds true for friends and relatives.
