The Indian real estate market offers a wide range of opportunities for investors, but navigating the landscape can be tricky. Not all cities are created equal, and some offer significantly better returns on investment (ROI) than others.
Factors like strong rental yields, a robust business environment, and a growing population all contribute to a city's attractiveness for real estate investment. So, if you're looking to put your money into Indian bricks and mortar, deciding on the best city to invest in real estate is crucial.
This blog delves into the top 3 cities in India for real estate investment in 2024, exploring their growth trends, upcoming infrastructure projects, and favorable government policies that are both in value and aim to provide a sizable growth in returns on investment. We will also provide insights on various investment mechanisms and crucial factors to consider before taking the plunge.
Why Are Some Cities Better Than Others for Real Estate Investment?
Several factors differentiate prime real estate investment cities from their counterparts. Here are some key advantages to look for:
Strong Economic Base: Cities with a diversified and growing economy tend to attract businesses and residents, leading to a sustained demand for housing and commercial spaces.
High Rental Yields: Rental income is a significant source of return for real estate investors. Cities with consistently high rental yields offer the potential for a healthy passive income stream.
Developing Business Districts: The presence of well-established or upcoming business districts creates a demand for office spaces,residences and amenities for employees. This can lead to significant capital appreciation for properties in these areas.
Growing Population: A rapidly growing population has led to an increased demand for residential properties, pushing up property prices and rental yields in the long run.
Infrastructure Development: Government investment in infrastructure projects like metro networks, highways, and airports improves connectivity and unlocks the real estate potential of surrounding areas.
By keeping these factors in mind, you can narrow down your search for the best city to invest in real estate in India.
Top 3 Cities for Real Estate Investment in India
1. Mumbai - The City That Never Sleeps
Mumbai, the financial capital of India, home of the Bombay Stock Exchange, consistently ranks among the top contenders for real estate investment.
Why Mumbai ?
This trend in growth is expected to continue well into 2024 and keep rising due to . This rise in property value is driven by strong demand from homebuyers and investors due to the rise in public infrastructure and significant revamp of public amenities.
- Infrastructure Projects:
The Mumbai Trans Harbour Link (MTHL), which was completed recently, has significantly improved connectivity between Mumbai and Navi Mumbai, further boosting real estate prospects in both cities. Additionally, the Mumbai Metro expansion plans will enhance accessibility within the city, unlocking the potential of previously underdeveloped areas.
- Price Trends 2023-2024:
According to JLL's (Jones Lang LaSalle) Residential Market Update Q4 2023, capital values of commercial real estate in Mumbai's prime central business district (CBD) are expected to appreciate by 6-8% in 2024. While property prices in the suburbs are likely to see a more moderate growth of 4-5%.
- FDI and Government Investment:
The Maharashtra government's focus on developing the Mumbai Metropolitan Region (MMR) as a global financial hub is attracting significant foreign direct investment (FDI) in the commercial real estate sector. This increased investment is expected to create a surge in demand for office space, pushing up rental yields for commercial properties.
2. Navi Mumbai - A Rising Star
Navi Mumbai, a planned city adjoining Mumbai, offers a promising alternative for real estate investors and corporations alike seeking a balance between affordability and growth potential.
Why Navi Mumbai?
- Infrastructure Projects:
The completion of the MTHL (Mumbai Trans Harbour Link) has directly benefited Navi Mumbai by improving its connectivity to Mumbai and reducing travel times significantly.
The recent launch of the Metro System in Navi Mumbai has been a boon for regular commuters. Navi Mumbai is now more well connected than before with the introduction of the Mumbai Water Taxi, that connects Belapur with CST via a well monitored waterway, that aims to expand to several other micro docks in Thane and Ghodbunder.
In addition to this, the Navi Mumbai Airport project, although facing delays, should be credited with having great potential to transform the city's real estate landscape once completed.
- Price Trends 2023-2024:
JLL predicts property prices in Navi Mumbai to witness a healthy growth of 7-8% in 2024, particularly in areas with upcoming infrastructure projects. This appreciation is fueled by increasing demand for well-planned residential townships with modern amenities.
- FDI and Government Investment:
The Maharashtra government's focus on developing Navi Mumbai as the crown jewel of Maharashtra has been commendable so far. With the help of private investments, Maharashtra had turned Navi Mumbai into a prime Central Business District and a well connected commercial and IT hub for several local and multinational companies.
This investment from both the Government and private sectors has turned real estate into a hot commodity, particularly commercial real estate. The high-quality amenities offered by the Navi Mumbai Municipal Corporation (NMMC) have further incentivised residents and corporations alike to set up shop in Navi Mumbai.
3. Thane - A Gateway to Opportunity
Thane, a well-established city bordering Mumbai, offers an intriguing potential for real estate investors seeking a combination of affordability, connectivity, and growth potential. This city is often slept upon when it comes to exploring options for real estate growth but on-ground reality is very different.
Why Thane?
- Upcoming Infrastructure Projects:
The Thane-Ghodbunder Road widening project and the upcoming metro line extension aim to improve connectivity within Thane and further reduce travel times to Mumbai. These developments are expected to unlock the real estate potential of areas along these corridors.
Price Trends 2023-2024:
JLL predicts property prices in Thane to appreciate by 5-6% in 2024. Areas with good social infrastructure and proximity to upcoming metro stations are likely to see the highest growth.
FDI and Government Investment:
The Maharashtra government's initiatives to develop Thane as a major IT hub are attracting investments in commercial real estate projects. This focus on the IT sector is expected to create a demand for office space and high-quality residential units, driving rental yields for both commercial and residential properties.
How to Invest in Real Estate?
Now that we've explored the top 3 cities for real estate investment, let's delve into the various mechanisms available for investors:
Direct Property Purchase: This traditional method involves buying a property outright. It offers the potential for high capital appreciation and rental income, but requires a significant upfront investment and carries management responsibilities.
Pre-Leased Properties: Investing in pre-leased properties allows you to generate rental income from day one. These are commercial properties that are typically leased to corporate tenants for long durations, offering a steady and predictable income stream. While the ownership and the responsibility of maintenance can change from person to person.
Real Estate Investment Trusts (REITs): REITs are a collective investment scheme that allows you to invest in a portfolio of income-generating properties. This method offers diversification, professional management, and liquidity compared to direct property ownership. However, REITs come with associated fees and may not provide the same level of returns as direct property investment.
Fractional Ownership: Fractional ownership allows you to invest in a portion of a high-value property, sharing the rental income and capital appreciation proportionately. This method offers a lower entry point compared to purchasing a property outright but may have limitations on control and exit strategies.
Investment Checklist
Before going forward with any real estate investment, careful consideration of several factors is crucial:
Market Research: Thoroughly research the chosen city and specific micro-market. Understand the property trends, rental yields, and infrastructure development plans. Reliable sources like Knight Frank and JLL reports can provide valuable insights.
Investment Horizon: Determine your investment horizon - short-term (2-3 years) or long-term (5+ years). This will influence your choice of property type and investment strategy.
Financial Planning: Ensure you have the necessary funds for the down payment, potential renovation costs, ongoing maintenance, and any additional expenses. Factor in potential vacancies and market fluctuations when calculating your expected returns.
Legal Due Diligence: Conduct thorough legal due diligence on the property title, permissions, and any outstanding dues. Seek professional legal advice to mitigate risks.
Tax Implications: Understand the tax implications of your investment, including capital gains tax, property tax, and rental income tax.
Remember that real estate investment is a long-term strategy and a high value investment. By carefully choosing your city, investment vehicle, and conducting thorough due diligence, you can increase your chances of success in the Indian real estate market.
Conclusion
The Indian real estate market offers a wide range of opportunities for investors. They are often asking themselves what is the best city to invest in real estate in India. Mumbai, Navi Mumbai, and Thane stand out as particularly attractive propositions due to their strong economic base, growing population, upcoming infrastructure projects, and favorable government policies.
By understanding the different investment mechanisms, carefully considering crucial factors, and conducting proper research, you can leverage the potential of the Indian real estate market and build a strong investment portfolio. Data is your best friend and current data indicates that Mumbai, Thane and Navi Mumbai are the golden goose of property investment and this Tri-city area is unarguably the best city to invest in real estate in India.
