Realty queries answered by Gulam Zia, Executive Director, Knight Frank India

Every week, an expert selected by ET answers queries from our readers on real estate investments.

I am a resident of Nagpur staying in Dahisar, Mumbai since last 25 years and working in Vikhroli. I am paying a rent of Rs 22,000 for a 2 Bedroom Kitchen flat. I am planning to buy a flat as I am getting married in December this year. Do you think it will be a better idea to continue on rent or buy a flat? Which areas would you recommend?
If your base is Nagpur and you are intending to buy a flat for price appreciation, then you should refrain from buying in Mumbai. Investment growth in residential properties is very low and with no price correction in sight, the purchase may not give you any upside. With regard to the areas of investment, the location preference will be decided by your office and connectivity with your future home. However, the most important factor will remain your budget. Considering that you work in Vikhroli, you could look at Thane, Kalyan-Dombivali belt or even Navi Mumbai as the commute from home to office and back will be a lot easier.

What is the first important thing to consider when you feel you’re ready to buy your home?
There are multiple factors that one must consider while buying one’s home, however, the most important focus area should be on finances. Depending on the quantum of loan a minimum of 10-25% of the total funds should be ready before purchasing a property for the margin money. Depending upon your salary, you must plan your loan, ensuring that your EMI (equated monthly installment) should not be more than 50% of your net monthly take home. You should finalise on whether to buy an under-construction or ready-tomove-in home, so that you can sort your budgets accordingly. Location, social infrastructure, proximity to workplace/school and in the vicinity of family and friends are some of the other factors that need to be taken into account when making a decision to buy a house.

What would be a good investment if I have to invest for rental purposes? Should I go for residential or commercial property investment?
The rental investment decision has to take into consideration the rental yield and the value appreciation. Curiously enough, these two factors work quite opposite to each other in case of a residential property vis-à-vis a commercial one. Like, rental yields are low for residential property but for commercial it is high. Whereas value appreciation in case of residential property is generally much higher than a commercial property. For a small investor, it may be safer to buy a shop to get the best of both the worlds.