I have an apartment constructed in 19990 rented at 50k/month worth 15 million. Would it be wise to invest it in plots in twin cities for better growth. Price appreciation of apartment in last 10 years is 5 million.
5 million appreciation on this handsome investment is not impressive. On the other hand if u invest in plot here in twin cities in a good reputed place, then there is a bright chance that you get your amount double in 4-5 years period aprox.
True that in a decade, appreciation can be better. However, it must also be considered that as far as a plot is concerned, it does matter the worth and location etc. unless something constructed on that. Smallest flat is still better than the biggest plot that is vacant, as flat will bring along monthly rent. In good locations such as BT Safari Villas, Enclave, GG a 2 bed flat costing approximately 8 million can bring along 40 - 50k as rent/month.
As a general discussion:
Standard rate of apartments is based on per sq. feet and on good locations that may vary from 7000 - 8000 PKR/sq. ft. The trick of investments in flats is:
- Try to invest when some ground leveling, or foundations of the buildings are laid at that time you can get an apartment of your choice and around 5500/sq.ft approx. Don't fall for pre-launch slogans, invest only once the very first floor start to get the structure under construction.
- Try to buy flats at a location that is fairly populated as it will result in better rental yield.
- In flats/apartments you can enjoy some outstanding locality at an affordable price. For example, in Gulberg Greens the locality is quite impressive with lost of greenery. To get that locality you must either purchase a Farm House (25+ million PKR) or buy a studio apartment for 2.5 million PKR. Both will enjoy the same locality, at-least. Same goes with apartments in Early Phases of BT, Prime sectors of ISB including Centaurus.
Back to the original topic:
Yes, I believe selling flat to go for a house construction can be better as it will appreciate better and will bring monthly rent, at-least.
A flat that has already been rented can be a better choice than a vacant plot. Remember the apartment prices also appreciate with the developments in surrounding and can be easily sold exchanged as monthly rent is quite an attraction to many buyers. The only downside is that you cannot alter the construction of a flat or may be very little modifications to the structure if its on an open land and entire building under your ownership.
Thank you very much imtiaz and azhar sahib for your valabale input. As far as 5 Million appreciation in 10 years is concerned we also have to take into account almost 3.5 Million rent been collected in these ten years. That makes the total to 8.5 million in 10 years.
Imtiaz sahib i have been reading your and some other senior memeber's posts from quite a while. It was a pleasure to see you repsponding to my query. Do you guys think that i should invest in files in DHA 4,or 3 islamabad or may be I-16, keeping in views that the appartment is almost 28 years old. It may now depreciate. A few questions i need to ask as my knowledge about property is very limited.
(1) I have read here that files are very risky, what i want to ask is that , are files in societies like DHA OR BAHRIA are risky too.
(2) Dont you guys think that going for shops is better option. because in apartments a considerable amount is spent in repair etc, where as in shops you dont need to spend a single penny in repairs, all refurbishments and repairs are the responsibility of tenant. (Correct me if i am wrong). Thanks again to you guys.
My views on your questions, any differences or corrections are welcome!
- CDA vs Others
I would go for the CDA Sector/Property as its fairly secure and gets the utilities earlier than others. For example, I-16 despite only about 10 - 15% occupied (construction wise) have the electricity, gas and water supplies available with CDA reserving funds for further development and rehabilitation of the sector. You can locate an exact plot with its number even on Google Maps. Compare it with lets say Bahria Enclave, Faisal Town, etc. where gas connections are still pending, yet prices are higher. CDA sector development may be inferior than some private societies but property keeps appreciating due to a genuine demand.
- Depreciation of Apartment/Home/Building
Depends if there are no structural problems, depreciation is mainly dependent on the location and supply demand thing rather than a building being old. For example, a house/building in which I live, 5 years back it was cheaper and now after five years building is more old as well as more expensive compared to five years ago.
- Files and Risky
Yes a file represent a future piece of land. Future is always uncertain. BT (Enclave 2, Phase 9, Phase 8 Ext.), DHA (DHA City, DHA Valley), CDA (Some sectors including partial part of I-11) all have issues and risk with the files. These are big names but still carry risk. The smaller ones have even more issues. Risk can be at different levels i.e., amount being sunk, amount being held up with little to no appreciation or being negative. More risk brings more profit as well. Files have different stages with allotment, balloting, and position/marking on the map. All in all, yes files can be tricky and risky but they can be purchased with low investment and can bring better results (in terms of percentage). For example, one of my relatives purchased a 10 Marla File on installment about 8 years ago, in Bahria Enclave Sector A for 30 lac approx. Now that is a fully developed plot with demand of 110 lac and above.
- Apartment vs Shop
It all depends on the agreement. As per any standard agreement, damage not maintenance must be compensated by the tenant (user). In any property, maintenance is on the owner, damage recovery is on the tenant. I have seen cases where people refused to vacate the shop as their business was dependent on that shop and it was a do or die for them. I have seen cases where the owner had to pay the tenant to vacate the shop so he can sell it. It really depends on individual circumstances.
Dear Asif,
Apartments are always slow rise.In this amount 15M you can purchase shop in Giga mall which will give you 70 to 75k without any headache.There is lot options in I-18 and G-15 which will give you good rent.
For investment point of view in real estate plots are always better option.
Regards
It depends on how exactly the term Investment is defined: Investment can be to achieve:
1. Monthly Cash Inflows: to get monthly rental income to keep the regular expenses running. In that case a constructed unit, i.e., Shop, House or Apartment supports the monthly income on investment.
2. Better growth of Capital/Principal Amount: to secure the side amount for better appreciation over a given period of time, plot can be a better investment so is the constructed house. Whenever, plot prices will rise, so will the prices of a constructed unit/house + monthly rent.
As far as figures, a 1000 - 1200 sq.ft apartment in BT-P1, Safari Villas can cost you from 5.5 to 7.5 million (+ transfer fee of 2.0 to 3.0 lac) with a monthly rent of 40k to 45k at minimum + no commercial tax.
Many thanks imtiaz and nadeem sahib.
@ Imtiaz sahib, Monthly cash flow isnt an issue for me at the moment Alhamdulilah. Plots/constructing house for resale are surely very profitable but zakat and capital gain tax gets applied on them where as rental income may be low as compared to investing in plots but is zakat free. What are your views on investing in high rise buildings keeping in view that we are on fault line and the case of gakhar plza in rawalpindi.
@ Nadeem shib, If you could plz explain why G-15 or I 18 is a choice for you among so many CDA sectors.
Salam Asif Sahab.
Please note that your rental income is not zakat free. You have to pay zakat on your rental income.
If you want to liquidate your apartment it will take time as well. In your budget you will find lot of investing options. You can consider raqba as well which has demonstrated much higher capital gains.
Plot for sal in I-12/1
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