India’s Rental Returns is Lowest Among The World

Date : Apr 4, 2014

India’s return of investment of residential properties through rentals in tier 1 cities is lowest among the world. Delhi’s rental is lowest at around 2% while Mumbai fares better at 3.5%.

 If anyone takes into account the capital appreciation returns surge to over 20% compound annually, this is among the highest globally. Global real state consultancy firms Jones Lang LaSalle (JLL) says, the return in the Indian market is low for this reason owning a real estate asset is risky in this country. To invest in the real estate sector, domestic as well as foreign investors find it highly attractive.

 From another consulting firm a senior consultant said that in emerging economies, investors raise funds into the real estate sector for high return from capital appreciation.

For this reason, the general norm of high risk return does not apply to the investment in residential real estate sector in developing countries.

 In developed countries, the annual rates of return through rental income from a residential properties current price are higher than emerging economies. If anyone compares the rental return with the opportunity cost fund, he/she will find that it is equal to the same if it is kept as fixed deposits with a bank. In New York, the rental return is almost six times from the bank fixed deposits. In Tokyo, the rental return is the range of around 4.7% while the fixed deposits rate is around 0.20%.

 India’s rental return is almost 30-40% of the fixed deposit rates. But most of the countries the rental returns is higher than the fixed deposit rate.

 The World Bank said in a report that India ranks 94 among 185 countries in registering property index, the Philippines and Indonesia rank 122 and 98 respectively. It is seen that both of this two countries are perceived riskier than India to buy properties. Meanwhile, Sydney’s and Beijing’s rental returns are in line beside the fixed deposits rate.

 In JLL report said that a rapid rise in capital values over rents across much of Asia has leaded a compression in returns. If the rentals command is same as return from capital investment as the fixed deposit rate, then a three bedroom apartment should earn around RS 75,000 to RS 1 lakh a month.

Source And Courtsey By:- http://www.mkobserver.com/indias-rental-returns-is-lowest-among-the-world/172597/