Rumour has it that real estate in Bangalore has headed for a slowdown. But if you look at property buying, it’s not as bad. Yes, the banning of property registration has affected the rate ‘officially’, but a lot of transactions are happening through the ‘Power of Attorney’ route. Some are just doing the deal with the sellers and waiting for the property registrations to open, so they can register.
This reminds me of an interview I had done with Irfan Razack, the head honcho of Prestige Builders in Bangalore some two years ago. Here are excerpts from it. Just one statutory advice: Take everything with a pinch of salt. Because in this business, no one can say anything for certain.
Can one never lose money in Bangalore real estate?
No. You could in the short-term. But in the long-term, you will always gain. Property is something solid. Real estate has its phases. It may take a dip or shoot up, it may even stagnate for a while, but it’s a solid asset. You can rent or keep it vacant, it’s for real unlike the stock market, which is just on paper. The scrip valued today may not even be worth the paper it’s printed on tomorrow. You can never go wrong in real estate. But don’t look as you would the stock market, but as a long-term investment.
Where does Bangalore real estate stand right now?
I have seen that once every 8-10 years, there is a high like the one we experienced in 2005. The last time we saw this was in ’94-’95. Between 1995 and 2005, prices have gone up, stagnated, normalised and now hit a high. How long will this last, I don’t know.
Has the market already reached saturation point?
Yes. 2008 is the year of reckoning. If you are looking at the rates, I would say the market has reached the saturation point. If you were to buy a property now and expect the price to go up in double quick time, it’s not possible. If people think they can make a fast buck, I would caution them.
What’s your advice to people who want to invest in property?
If you have spare money, invest, but think of it as a long-term investment and it will certainly give you a huge appreciation in the long run. The only thing needed is patience and the capacity to hold on to your property.
How is that different from playing the stock market?
For one, you need to hand it to the experts to play the market on a daily basis and then again, the stock prices are not really under your control whereas in real estate, you have a control. You can either rent, occupy or lease and we mustn’t forget that the capital value will never depreciate. It might take a dip, but will go up eventually.
What’s essential in any property deal?
Make sure the location’s good, the property’s well-built and the titles are clean. It’s best to go to a reputable agent or developer. His track record and performance will determine his reputation.
Are the prices realistic?
They are still affordable. Once you breach that affordability factor, it goes into a downward spiral and the boom goes bust. It happened the last time after the ’95 boom. And then, inflation and purchasing power went up and the real estate prices that seemed high suddenly looked affordable. It’s pure economics at play.
What are you doing to dissuade speculators?
We don’t give more than one property in one person’s name. It’s a risk. We are learning from the past when a person bought a lot of property and when the market was not as buoyant, he defaulted on payments. We don’t want that to be repeated.
Any other lessons learnt?
Don’t be too optimistic and don’t buy at a very high price. If the property becomes too unaffordable, leave it alone. Of course, location and clear titles are important, too. If your product is excellent in whichever market, it will sell, even if it’s in a secondary location. Take Prestige Acropolis on Hosur Road. The price here is almost double the price of the buildings adjacent to it.
(This piece appeared in 080, a monthly lifestyle magazine run by Explocity Private Limited)