Evaluate your property investment

Reputation of the builder and quality of construction. Properties by some developers are worth a lot more than others because of quality. Dont always go for the lower price because there could be huge execution risk with less reputed builders.

Payment terms. This is one of the very important aspects of investment. You can invest in time-linked or construction-linked payment plan or perhaps look at the conventional way of either through a cash or cheque. The payment option you choose will affect your cashflow in various aspects of your personal finances.

Project approvals and licenses. Before applying for a loan,ensure that the developer or the party from whom you are getting the property has requisite set of project approvals or licences required. Unavailability of these documents might affect your ability to get a home loan.

Contractual guarantees. In case you are signing in for an assured-return scheme,it is advisable to either get a written guarantee from the builder and post-dated cheques in your name,if possible. Do get a realistic delivery date of your project.

Demand and supply. Over or under-supply will affect the capital appreciation potential of your investment and also the rental yield you might expect.

Floor-space index and carpet area. Put some effort and learn about the local rules on the built-up area and available square footage carpet area of the place where you are buying the property. Any confusion regarding these parameters might reduce the usable area.

Real estate investing

When it comes to the process of making a property investment and exiting from it,there are a few things that you must keep in mind.

Transaction costs. When you buy or sell property,there are many transaction costs associated with these activities. You might have to pay a brokerage fee to the intermediary. If you have made a gain on the sale,there will also likely be a resulting capital gains tax liability.

You will also face some expenses related to the stamp duty at the time of the transfer and registration costs of the property. All these costs can add a material amount to the purchase or sale price of your investment.

Liquidity. Unlike stocks that you can sell readily and convert into money in the hand within a couple of days,buying and selling property takes time. Your ability to convert your investment into cash in hand is quite restricted.

Its not uncommon for deals to take up to one year,and still fall through at the last minute. So if you feel that you can sell your property to pay for your childs education abroad,you might be in for a shock. To have easy access to this money,you might be better off putting it into a financial asset that you can access at a short notice e.g.,fixed deposit,or liquid fund.

Cash. Property investments are not always the cleanest when it comes to cash versus cheque component of paying for deals. Unlike mutual funds where KYC norms require that the investment be made in cheque and the PAN card details be shared,real estate investments can have a huge cash component to them. This might not suit everyone.

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