With share market up, focus shifts to
land deals
Real estate
By Vasu

IS it finally the right time to buy, or to target the property one wants to pick up? With the stock market witnessing an ‘uptrend’ and the heavy-weight indexed scrips showing a 25 to 30 per cent rise during the last four months, attention is now shifting to land deals. A couple of months ago, this column had quoted reliable market analysts predicting an uptrend in the then depressed stock markets. The past few months have shown a rise even in the B-grade shares.

Stock market winnings are traditionally recycled in the real estate market, says Sarat Jain of the Architects Bureau, in the long term. Property also saves one from taking care of or saving large volumes of cash, says K. K. Arora, a real estate consultant. According to him, the gains from real estate are not likely to be achieved in a short term. With the share market just looking up, funds will first be diverted from the property market to the share market. It is only when the stock market gets overheated, which it is likely to in the next three to four months, will the money flow back to the property market. Ultimately, the gains in the stock market are dependent on the policies of the government and even extraneous factors like federal interest rate cuts. The average investor, however, is looking for steady and safe returns which can only be provided by investing in property.

The last year has also been boom time for converting benami property. With values dipping to even less than half at prime positions in metros, this was the right period for these conversions, says Arora.

Share markets are now going up and the foreign institutional investors ( FIIs), who have to book profits and pay out their dividends in December, will start selling in the Indian market around October and the share market from that time onwards will begin to decline again, says Sarat Jain. So, the time till mid-September is the right time for picking up property and some returns are likely to come within six to eight months, says Arora.

Now the crucial question is where and what to buy? In and around Chandigarh, the peripheral townships, are always a better bet than the main city. The reason for this is that the already saturated market conditions have steady property prices even in a depressed market. In the peripheral townships, commercial segments in developed sectors top the list with the likes of McDonalds, Pizza Pizza Kings, KFC and numerous branded apparel firms prowling for franchisees in the suburbs. This is followed by vacant residential plots in the medium- sized segment (between 250 to 375 sq. yards), as they are easier to offload and are usually preferred by speculative investors. Flats are also an attractive proposition with a sizeable number of flat owners facing interest pile-ups and prospective default on interest payments. Several such sellers and also speculative investors are selling holdings at less than the market price with the premiums disappearing for most housing societies.

In Punjab, especially in rural areas of Hoshiarpur, Garhshankar, Ropar and Jalandhar, particularly where agricultural land is comparatively cheaper--in a a range between Rs 1.5 lakh and Rs 2 lakh per acre --- poplar plantations have provided for sound property investment.With the returns from industry on a decline, poplar plantation investments have picked up, says Rekha Gupta, whose husband has made substantial investment in land there. The plantation provides for tax-free income. Besides, she says, the land purchased is rural and at the time of of resale does not attract Capital Gains Tax. Thus, the net profit stays untaxed. Even in times when urban property has shown a rapid decline, agricultural land has held steady.

Initially, the maintenance cost per acre every year works out to be Rs 5000, besides investment in the plants, which is around Rs 4000 per acre taking an average density of 200 plants per acre. Taking a gestation period of a minimum of seven years, investment on nurturing works out to be around Rs 35,000 per acre, whereas returns on current date at a rate of Rs 2,000 per plant works out to a neat Rs 4 lakh. The icing on the cake is, of course, the cost of the land which would at least double, if not triple, in value. Also, since the poplar trees shed leaves in winter, farmers plant citrus trees for a simultaneous crop which starts yielding returns after the fourth year.

Brokers of the area feel that barring the Kargil situation, the smile on the face of an intelligent, average real estate investor is set to revive. NRIs, who have always played a dominant role in the boom in real estate markets across the country, are also likely to arrive again this winter, feel brokers here, in anticipation of a stable government at the Centre.