Last 14 months have witnessed phenomenal returns on real estate in Delhi
and NCR and whole of India. Though currently Gurgaon is slowing down, with prices having come down
by 20% in certain cases ... still there is bullishness with caution. However,
seemingly
money is moving to Dwarka from Gurgaon.
With opening of Delhi metro line to Secretariat and Connaught Place almost
a certainty,
Connaught place has seen jump of 20 to 40% in capital and rental values. Inner circle showroom
space rents at unheard Rs. 450 to 500/- per Sq. Ft., with showrooms space is in
scarce supply. This positive sentiment due to Metro opening is pushing up demand in Dwarka
and prices.
Answer to this is not easy. But it is still possible to find investment
opportunities. Read on to know more.
To identify parameters for safe investment were difficult. Finally
it boiled down to the question... if I invest my money in Real Estate anywhere, will a
possible crash or bearish sentiment in Real Estate erode my
real estate investment?
This meant, buying property at prices which in equity market parlance is
called "value buy". Rock bottom prices. Choice was between a developed
property or land. Developed property has the advantage of finding a tenant so
as some return on investment is there. But then, in developed property, you
pay for the developer's profit. Bearish sentiment can erode values in such
investments considerably.
Land seemed to be safer. But what about a recurring return - monthly or
annual from the land? This set me on to the exercise that if I had 1 (one)
Crore rupees, then what shall I do?
This quest led me out of of Delhi and finally, in Rajasthan, within 100 Kms
from International airport, I located large tracts of fertile agricultural
land with sweet water in the range of Rs. 2 to 3 Lakhs per acre (including
acquisition cost of stamp duty plus brokerage). Undulating land, with few
hills around, lake etc.
It is possible that the land prices will not appreciate so quickly and the
holding may exceed few years. Could I then earn recurring revenues? Answer was
a simple and emphatic Yes. Investigation showed that multiple sources of
revenue are possible.
Simplest is leasing the land for one year to the local farmer who pays you
either in kind or cash. About 6-8 % annual return on the investment is
possible. Fear here is that such lease creates a right for the farmer. But
this is not true. Each third year, a new farmer can be found and land leased
to. This is not difficult, and is done quite often.
Even better returns are possible, if herbal farming is done. Safed Muesli
shows tremendous potential though there are negative reports that it did not
work for the few who tried. But there are many, for whom it has worked. When
properly done and marketed, it can generate upto Rs. 2 Lakhs per acre of
profit in one year. Profits from first year itself possible.
Another possibility is growing the bio-diesel plantation. As per Govt.
notification, in few years time it will become mandatory for a 5% mix of
bio-diesel with diesel. Yes ... the bio-diesel is in short supply. Consistent
revenues of Rs. 15 to Rs. 35 thousand per acre per year with minimal
caretaking.
Then many other possibilities ... growing carnations, poultry, exotic
vegetables, open a resort, conference center etc. Rajasthan govt. fairly
co-operative on this.
Finally, the big bang is possible. Expansion of urban areas can push up
dramatically the land valuations. In any case, large tracts of land give a
high level of well being factor to oneself and the family.
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