Since the dawn of civilisation, man has been obsessed about the roof over his head. In fact, one of the biggest financial concerns of an individual is buying a house. More so as property prices continue to zoom upwards. One way to find a house that fits your budget is to shrink your requirement.
Fortunately, developers have anticipated this need and a flurry of projects offering apartments between 300 sq ft and 800 sq ft have come up. However, a nagging worry for most buyers is whether such smallsized apartments offer value for money, especially where the resale value is concerned.
Serviced apartments are a good investment as you earn rent and the value of the property also appreciates every year, usually by 10-15 per cent.
SHVETA JAIN
Director, Residential Services, Cushman & Wakefield India
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It makes sense for a young professional or a couple to buy a small house, especially if it's near their office. Rather than paying rent, it is better to pay the EMI as one also builds an asset. Most such apartments are coming up in the suburbs, which makes them cheaper than renting a room within the city limits. Also, these are adjacent to industrial and IT hubs where most jobs are concentrated, so it cuts down on transportation cost.
"There is a steady demand for studio apartments, both in the metros and tier 2 cities. They are usually the first to be sold out in a residential project because they are the most cost-effective, especially in projects close to workplace hubs," says Sanjay Dutt, CEO, business, Jones Lang LaSalle India. As long as these centres continue to thrive, so will the demand for such apartments.
"The demand is ample and the supply is trying to catch up. The demand is so high in certain cities that residential bungalows in Bengaluru are now being converted into studio and 1-bedroom apartments," says Shveta Jain, director, residential services, Cushman & Wakefield India. Other than young professionals, developers are also targeting senior citizens, who may not want the burden of maintaining a large house. Medical tourism too has given a boost to the demand for these apartments, particularly those in the vicinity of specialised hospitals.
Which one should I choose? In India, the terms studio and onebedroom are often used interchangeably. The main difference is that studio apartments do not have concrete walls dividing the interiors (other than the bathroom), while one-bedroom apartments have proper walls delineating the rooms. If your company provides regular meals, buying a studio apartment with a tiny kitchenette will make more sense. For privacy, you could always erect temporary partitions.
People who stay for 3-6 months in a city find it cheaper to buy a studio apartment and sell it rather than stay in a hotel
SANJAY DUTT
CEO, Business, Jones Lang LaSalle India |
This will also give you the flexibility to decide the sizes of various rooms. If you plan to stay in the same area for a couple of years, opt for an unfurnished flat. Though developers offer fully furnished studio apartments, they will not tell you the cost of each piece of furniture or electrical fitting. You might find it cheaper to buy and install things yourself.
Smaller apartments are also more cost-effective in terms of the stamp duty and registration charges. For instance, if you buy a house worth Rs 35 lakh in Chennai, the stamp duty will be Rs 4.5 lakh, but if you opt for a Rs 15 lakh flat, you will have to pay less than Rs 2 lakh. However, other costs, such as having to compulsorily buy the parking slot and club membership will be fixed, no matter what the size of your apartment. In the case of annual maintenance charges, ensure that these are calculated on the basis of the area of your house and is not a fixed fee, irrespective of the apartment size.
If you do not want to live in the house and only want to buy one as an investment, you could also consider a serviced apartment. These are fully furnished flats, including items of daily use, and also come with a range of services, which could include a cleaning crew, a cook, laundry services and a car with a chauffeur. Though this hikes the price, the rental income from such apartments is high. These can be leased to companies or those staying for a fortnight to six months.
The tariffs for these start from Rs 2,000 per night for a 300 sq ft apartment, depending on the location. The monthly rent starts from Rs 10,000 in the national capital region. Though a part of this goes to the operator who manages the apartment, about 50% comes to the owner. "Serviced apartments are a good investment as you earn rent and also benefit from capital appreciation," says Jain.
Will I get good returns? Once the size of your family expands, you will obviously want to sell the small flat and move to a bigger house. But will the price appreciation of your studio apartment be on a par with that of the larger ones? "The appreciation for serviced apartments is not as high as that for a 'traditional' one, but it is usually 10-15% year on year, a better return than most places where you would otherwise park your money," says Jain.
She cites Assotech Cabana in Indirapuram, Ghaziabad, which she says has appreciated nearly 100% since it was built five years ago. Before buying an apartment, no matter what the size, your prime consideration should be its location. Opt for a project in a suburb which has good connectivity and where new industries are being set up. Find out if any major hotels or government projects are coming up. All this will enhance the resale value of your house.
"The rise in prices is a function of timing and demand. When the prices were not very high in metro cities, the houses most sought after were those with an area of 1,500-1,700 sq ft. Now, with prices having zoomed, the demand is the highest for 1,100-1,300 sq ft houses. Perhaps, in a few years, the dynamics may change again and flats with space less than 700 sq ft will be the only ones that are affordable," says Jain.
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