If you are planning to buy a property in the near future, get ready to pay more or settle for a rented accommodation. Soaring property prices are transforming key residential destinations, such as Delhi-National Capital Region (NCR), Mumbai and Pune, into rental destinations, according to the latest property portal Makaan.com’s buy versus rent index for the January-March period.
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Property prices in the two metro cities saw an increase this quarter compared with the last quarter. Pune and Hyderabad, too, saw a hike but not as much over the same period.
Says Aditya Verma, chief operating officer, Makaan.com, “Places like Ghaziabad and Thane, where rentals were low, are witnessing an increase in rentals. While rentals are increasing gradually, the pace of increase in the capital values is faster than the pace of increase in rental values. This is hitting the affordability of prospective homebuyers.”
Rental destinations: According to the index, Delhi-NCR’s Dwarka, northern and eastern regions have got maximum points on the index, suggesting that these areas are more expensive in terms of buying. At some places, property prices have already touched the levels of 2008; Mumbai and Pune fall in this category. Similarly, central Bangalore is an expensive locality for buying.
If an area has a rating between 1 and 20, it makes sense to buy. When the index moves between 21 and 25, it is relatively more expensive to buy a home than to stay on rent in these cities and sub-cities; the index calls this a neutral zone. Anything above 25 and you should prefer staying on rent. Most localities mentioned in the Mumbai region are either falling in the neutral zone or have moved towards the expensive side. Overall, India has risen to 21 from the previous mark of 20 during the October-December 2010 period.
Buying options: Some peripheral cities of the two metros still offer good buying options. “There is good appreciation potential in tier II and other metros other than Delhi and Mumbai,” adds Verma.
The first of its kind in the Indian market, the index covers seven cities: Delhi-NCR, Mumbai, Bangalore, Pune, Hyderabad, Chennai, Ahmedabad and Kolkata.
Launched in the previous quarter, it arrives at its conclusions taking into account factors such as average capital value of property, average rental value, rental yield, historical capital and rental price movement and inflation.
To find out whether things would change in the future, it may help to track the index.