Hi,
I am interested in buying a residential flat in Noida/ Greater Noida for the purpose of investment via 'rental returns' and 'cost appreciation' . Two broad categories that exist in the market are:
1. New projects which offer a delayed possession( 2.5 to 3 yrs) but are relatively lower on cost.
2. Resale flats which are ready to move in but are available at a premium.

I plan to take a home loan to finance my purchase. If I book a flat in an under- construction project, I loose on the rent I would have got from a ready-to-move-in flat. In addition I loose on the income tax benefits for the gestation period. Both these factors would have offset my EMI liability to a great extent. But if I try to go for a ready property, I end up paying a huge premium.

I would request the fellow members to guide me out of my dilemma.
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  • Dear Frnd,

    If you plan to take more than 30 percent home loan then it is not a good idea, infact it will be a bad idea to take home loan and buy a property, especially ready to move in.

    Consider you buy a flat for 50 lacs.( all loan)

    You get a rental income of Rs 10000 per month
    Total income every year= Rs 120000
    Please note there will be some expenses every year to maintian ur property.

    Present market scenario will not let the prices increase for at least 3 years. There is very big supply hitting the markets.
    The intrest you will be paying every year will be around 9 percent . which means u will be shelling out around Rs 450000 every year.

    Net income will certainly be negative. Any appreciation in property price will negated by this intrest cost.
    Unless your property starts apprecating more than 12 percent ( CAGR )every year which is highly unlikely in present market.
    In five years time unless your property prices double, you are unlikely to gain anything if u hve taken loan.

    Regarding tax breaks, there are other ways /investments by which u can reach to the tax exemption limit.

    Investing in property by taking loan in present secnario is not a wise choice.

    However if u plan to invest in new projects , you might be able to see some appreciation if the projects are delivered on time or with a delay of year or two.
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  • Thanks, but a few more queries...

    Thanks for your insightful advise. I think what you are saying is right.
    I would however like you to clarify the point you made about property rates not going up in the next few years, and are there cities in India which are going to have an opposite trend? If it is based on some personal research, I'd request you to share the details. Also, please advise on the issue of 2BHK vs 3 BHK when it comes to returns in the 'rental' market and 'resale' returns.
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  • Dear anurag,

    Well its very difficult to speculate which city will give u good returns, most of the cities are quoting very high property prices.
    Only city which is contiunously defying the gravity is Mumbai, but I read somewhere even in Mumbai the volume of deals have dried up due to high prices.

    Regarding investing it is always better to invest in smaller units as compared with bigger units.
    Logic: There is much more liquidity and volumes in low price housing.


    For the purpose of investment land gives highest return, however their is no rental income on land.
    Present speculator paradise is Yamuna express way plots, however dont buy from open market as the prices have already gained around 40 percent in last two months. Wait for new launches from Yamuna expressway authority.( RPT dont buy from open market)

    Originally Posted by trueanurag
    Thanks for your insightful advise. I think what you are saying is right.
    I would however like you to clarify the point you made about property rates not going up in the next few years, and are there cities in India which are going to have an opposite trend? If it is based on some personal research, I'd request you to share the details. Also, please advise on the issue of 2BHK vs 3 BHK when it comes to returns in the 'rental' market and 'resale' returns.
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  • You have given a v. good advice. v. useful for all the readers.
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