Buying a home in Mumbai would be a dream come true for many of us. Property prices in the “city of dreams” are shockingly high, however, with house prices defying all logic of the supply-demand equilibrium. Realistic home-buyers opportunities for middle and even high-income families are increasingly few and far between in this city of 22 million residents.
At the same time, investors of semi-luxury and luxury apartments find their dormant investments have no takers, and the number of unsold units continues to rise. At what point does the unmet demand from middle-income families meet the value-for-money sought for by those looking for a lucrative investment?
Affordable housing is arguably one of the investors best options available in these uncertain times. Let’s look at these issues from an investor’s perspective. With limited income sources, ever-increasing expenses and high inflation, the middle-income family is financially squeezed, but this does not quell their desire to leave a legacy for the next generation. When considering a property purchase, five basic principles are sought after by this home-buying demographic: Safety, Security, Affordability, Return on Investment and Legacy.
Affordable housing fulfils middle-income families desire for a safe and lucrative investment. The ideal property needed to fulfil these dual objectives, however, must be in a desirable location, close to amenities and be within easy reach of the city-centre, to insure price appreciation and higher future rental yields in the future. Surely this list of requirements is beyond the reach of the average middle-income family?
Fortunately, Xrbia developers, India’s affordable housing leader is working to make this dream a reality. A compact home from Xrbia in a prime city location like Chembur will cost around 42 lacs and, assuming a rental income of 20,000, the rental yield will be 6%. Now this beats the standard rental yield in a city like Mumbai which is in the range of 2-3%. Add to this the capital appreciation and in 5 years, this represents a very lucrative investment.
Let’s dig a bit deeper in the above scenario. Let’s assume the middle-income family has savings of 20 lacs and takes a home loan at 8.6%, which means an EMI of around 18,000. Add to this another 7,000 per month for standard regular expenses such as maintenance and tax and any other expenses with regards to the flat. Now this adds up to 25,000 as cash outflow. Now let’s look at the income side. Reflecting the desirable location, proximity to amenities and connections to the city centre, we can assume a monthly rental income of 20,000 and an interest income of 4% on the refundable deposit of say 2,00,000, which is 8,000. This itself gives you a leverage of 3,000 (28,000 income and 25,000 expense). Now, if you assume standard appreciation of the property of 10% per year, the return on investment is much beyond your imagination and far better than any other investment option. Indeed, it is a dream come true for any investor.