Maintain, Upgrade and Gain – Higher Rental Yields


Maintain, Upgrade and Gain – Higher Rental Yields

With plenty of New Properties available and expectation levels gone up, it is imperative to maintain your old property to stay afloat and get that high rent!!

Mumbai as a city has finally witnessed a range of new buildings which have come up for possession now and there is ample stock offered by Investors and property owners in these new buildings right from South Mumbai to Distant Suburbs both in Central and Western side which are offering the latest amenities coupled with lifestyle living and the buildings have plush swimming pools, gyms, sauna, steam etc. and several other family friendly features to entice anyone looking to lease an apartment also the cost of acquiring the same has become extremely exorbitant.

Even Investors who had bought these properties for the sake of investment are now finding difficult to off load the properties at higher prices. Higher rate of return on their base investment and with not many future Investment prospects in sight to redeploy the proceeds in this market and to set off Long Term Capital Gains it is influencing them more to give their properties on leave and license basis. This is also a good sign for the Mumbai Lease market as more stock would mean that prices will remain stable on leasing at least. An average investor expects returns on Investment on Residential properties in the range of 6 to 9%. If he has bought the properties a few years back, he will in most cases get returns of around 7 to 12% enough to pay his bank EMI and outgoings.

With new building blocks coming up for possession a lot of focus has suddenly been seen on leasing apartments in these newer buildings. The thought of living in a New Complex with amenities has invoked definite interest with the Executives working for MNC’s, Corporates etc. all across the city. The executives are prepared to move anywhere from Bandra to Kandivali or from Lower Parel to Mulund and also in extending locations like Thane, Palm Beach Road (Vashi) and Kharghar in search of that quality flat studded with Modern amenities which brings the family the much needed comfort and joy. A lot of executives who yearn for that quality life style and to offer their families the best have even started adjusting to the fact that if they need to travel another 30 Min or more it makes their family life easier as there is enough to do for kids, they can swim, play in the podium gardens, stay within the gated community, make more friends and also come back home within minutes of mom waving them out of the balcony.

The executives are adjusting themselves by either leaving early morning, working out of the cars in their latest laptops, Black Berry’s and their latest gizmos and an executive commented a few days back that where do you get time to enjoy that 16GB of Ipod loaded with your personal music collection. A lot of companies are also encouraging people to work out of homes especially who do a lot of research based works etc., the concept of a SOHO (Small office Home office) is emerging again and I guess with fuel prices about to go up this will catch up more, and encouraging travel only when you need.

In Mumbai, typically if one goes and leases an apartment, he is shown multiple choices beginning from a 50 year old apartment poor maintained to the top of the line newly done apartment block with various add-ons. The way the new generation buyer wants to deal is a hassle free transaction. As property owners, one should realise that the more the property is maintained well the chances are your property getting off the market quickly and you going to the bank much sooner than you thought. In Mumbai, the typical attitude which a lot of owners have is that they wait and watch, and the simple logic is let a tenant come and like it and then we will get the works like painting, polishing and cleanup done. What they fail to realise is that there is a loss they will be incurring in doing so that if the number of days spent in doing that last minute repair. Does that sound like being penny wise and pound foolish, yes that is correct, one needs to also take in account the opportunity cost that money can have. With enough competition from various new buildings the old building owners need to spend and make the property Tip Top to enable a positive response. Each executive who is looking for apartments today, looks for at least a week in different locations suiting his budgets, schooling needs etc. and he would shortlist not more than 3 apartments from the 20-25 he has seen, now how do you stay afloat in such thick competition, be it a Bandra, Worli or a South Mumbai or any premium location.

The lease rental values currently in most of the new blocks are affordable to an extent depending on location, amenities etc. Even in one building you could see a difference of pricing between 10% to 30% because of furnishings, views and any other upgradation the owner might have done. In Hiranandani Gardens, Powai there is a building called Octavious, where there are premium 2200 sq.ft 4 BHK’s available and presently there are more than 15 flats available on Lease there and they range from Rs.200,000/ per month going to Rs.250,000/- per month depending on the interiors, fully furnished conditions and floors. It is a new building and you can see the variation in the prices.

Ideally, people should leave their apartments Semi Furnished in Mumbai, with Kitchen cabinets, wardrobes, lights, fans, curtain rods, bathroom accessories, safety grills as required, split air-conditioners in premium apartments or window air-conditioners if that is possible. Most of the people who relocate to Mumbai from Companies usually have their moveable furniture like beds, sofa, dining table etc. and electronics, if someone does not have then it is always possible to go and buy across a few stores and within a few days the house is set and one can always negotiate to amortize the extra expense over a period of 3 to 5 years.

In a competitive market, the property owners, need to have a flexible attitude to transact with the terms and conditions of the leave & license agreement and they should rely on the Professional Real Estate Consultant in this regard. A lot of Professional Real Estate Companies specialize with Company Lease and have a lot of in depth knowledge on the subject to give both the parties a balanced deal.

Sandeep Sadh

Real Estate