Is it an ideal time to sell your Bangalore property?

Whether or not to sell your property in Bangalore depends upon the market trend. The current market is quite disappointing. The property rates have been stagnant since the past couple years and do not seem to indicate any signs of change in the near future. So, is it wise to hold on to your property for dear life or just sell it off? Let’s see!

Let’s state some facts

If you are wondering to wait for a couple of months hoping that property rates will improve then be rest assured that it is going to remain stagnant for at least a year or two. Rental yields are around 2%-4% and are consistent with that around the world. Rentals yields will not increase either.

Moreover, fixed deposit interest rates are around 7%-7.5% and will remain the same. If you are considering investment in mutual funds then you can yield interests with a rate of 10%-20% if invested on a term of 3 years.

Options at hand

One of the suitable options is to keep the property for a period of the next 3 years. In the meantime, you can give the property for rent and yield interest at a consistent 2%-4% return from rentals. If the market does seem to prosper within a couple of years then you can receive a 5%-10% return in the 3^rd year after selling your apartments in Old Madras Road. This is quite a favorable option.

Other than that, you can choose to sell the property right away! Well, assume that the least you will get is to cover your principal. Since capital gains are negative, no taxation and minimum return on any given financial instrument is 7.5%. So, after deducting TDS, you end up with a return of 6%. This is the next best option, right? If you compare the two options, the latter would seem the smarter choice more often than not.

The residential market tends to behave in the same manner across geographies. The principle of demand and supply says that real estate prices directly depend upon the development rate of the country. While India is a fast paced developing country, this does not seem to hold true for its real estate market.

The answer lies in the simple fact that while India has experienced a growth rate of 7.5%, inner Bangalore experienced a GDP growth rate of 6.8% in 2015. So, it is safe to assume that the inner city hardly witnessed a growth of 3%-4% at the most. It is actually the Tier II cities and metropolitan outskirts that are bringing in the growth.

Where does opportunity lie?

Well, the realty sector of Bangalore is driven mainly by residential and commercial properties, thanks to the IT sector. So, if you have invested in flats in Old Madras Road then it is highly unlikely to expect a greater rate of growth than 5% in the main city area. So, the best option is to sell such a property off immediately, be it at any price. You can use the selling amount as an investment in any of the aforementioned financial instruments such as in mutual funds or in real estate in other cities and gain a satisfying return on investment later on.