My personal observations from Bangalore and Hyderabad markets.
Lot of people hesitate to do decent interiors that would not cost more than 2 lacs on a 30 lacs property. The reasoning is that when I am not going to stay there why should I risk rough usage of the wood work by prospective tenant. But, they miss the financial angle to it.
1. People do not rent property with out adequate privacy provisions for their personal belongings and sufficient storage
2. With the growing affluence, wood work is a standard fitment
3. And most importantly the financial angle, if you get 11,000 for your 30 lacs empty shell property you can get 12,000 for your semi-furnished property (with woodwork). Work out the math, it is 4.03% against 4.5% return on investment. An increase of 11.6%. This difference would decide when you break even on the rental property purchase.
P.S. The returns looking shockingly low but a high inflation country has the bane of locking part of the returns in the capital appreciation, which is to the tune of 10% every year. So, add up 10% to 4.03% or 4.5% to see the realistic picture.
Going rates in Hyderabad - May 2014
Shutter work - 600 per sqft
Box work - 1000 per sqft
Trivia: US (which was seeing inflation rates of 2%) saw property appreciation of 15-20% between 2004 to 2008 till the property crash and financial meltdown came calling. The appreciation was not in tune with inflation and had already pointed to abnormality in the market, where property was being seen as a lottery ticket in an economy which was not seeing any growth. Growth during the period at 3-5% was more realistically close to the inflation performance.
Lot of people hesitate to do decent interiors that would not cost more than 2 lacs on a 30 lacs property. The reasoning is that when I am not going to stay there why should I risk rough usage of the wood work by prospective tenant. But, they miss the financial angle to it.
1. People do not rent property with out adequate privacy provisions for their personal belongings and sufficient storage
2. With the growing affluence, wood work is a standard fitment
3. And most importantly the financial angle, if you get 11,000 for your 30 lacs empty shell property you can get 12,000 for your semi-furnished property (with woodwork). Work out the math, it is 4.03% against 4.5% return on investment. An increase of 11.6%. This difference would decide when you break even on the rental property purchase.
P.S. The returns looking shockingly low but a high inflation country has the bane of locking part of the returns in the capital appreciation, which is to the tune of 10% every year. So, add up 10% to 4.03% or 4.5% to see the realistic picture.
Going rates in Hyderabad - May 2014
Shutter work - 600 per sqft
Box work - 1000 per sqft
Trivia: US (which was seeing inflation rates of 2%) saw property appreciation of 15-20% between 2004 to 2008 till the property crash and financial meltdown came calling. The appreciation was not in tune with inflation and had already pointed to abnormality in the market, where property was being seen as a lottery ticket in an economy which was not seeing any growth. Growth during the period at 3-5% was more realistically close to the inflation performance.
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