Pune: The Sweet Spot for Real Estate Investment in India
With more than 12 years of experience in the stock market, I have realized the importance of diversification. In my first two years of investment, I faced huge losses due to heavy concentration in my portfolio. However, I learnt from my mistake and redesigned my portfolio with proper diversification. I came up with a simple formula where an equity portfolio should consist of 15-25 stocks. We should also keep in mind that we should not invest more than 10% in any one stock and not more than 30% in any sector.
Similarly, in my first 5 years of experience in the stock market, I realized that diversification should expand beyond the stock market as an asset class. Real estate is one of the best asset classes to hold for the long term, and it has given multifold returns to the investors in India. It is an illiquid asset, where selling is a major problem in India. However, with the growth in the channel partner sector and shadowing the western culture, the problem of selling will decrease.
We have seen the stability of real estate during the 2008 financial crisis and COVID-19 in 2019. When the stock market just crashed, the real estate market was very illiquid, but there was very little impact on it compared to the stock market. With the cushion of stability, real estate in India is giving amazing returns (approximately 4% rental yield + the capital appreciation). However, the financial capital Mumbai has saturated when you see the returns in real estate due to higher costs and low land availability.
Pune is in a sweet spot to grow in the real estate space. The city is well connected to Mumbai and has immense scope for development. Being born and brought up in Pune, except for the 4 years which I spent in Sydney, Australia studying and working for the Commonwealth Bank, I can see the city growing horizontally and vertically. The recent redevelopment projects in the prime locations of Pune are making it very attractive for the end-users. The second-biggest listed player from real estate, Macrotech Developers (Lodha), has entered Pune with a bang.
Ready Inventory of INR 9b and strong launch pipeline of 1.1msf, they are seeing immense potential in Pune. With metros connecting the outskirts of Pune, the capital appreciation will reach more than 8% CAGR, adding an average of 4% rental yield in total, and give more than 12% returns. In the current market, this is difficult to earn from a few large-cap names in the stock market, considering the volatility and risk associated with it.
Author Details:
Name: Apurv Sarda
Designation: Business Partner
Email: [email protected]
Business name: Motilal Oswal financial services ltd
