Price Trap Two – LOCATION.

After addressing the most common Price Trap, The Big Brand Builders, in some detail, I move to another price trap Real Estate buyers/investors often fall for – Location. Read about the most common myths about Location and why they are just that... Myths.

BREAKING THE MYTHS ABOUT LOCATION.

It is often said that in real estate ‘it’s all about Location, Location, Location’. Frankly, it is not. Although important, it isn’t and should never be the sole criteria for taking Real Estate Investment decisions.

Myth #1: Buy/Invest in property close to a highway.

A location which is usually oversold is the one with direct access to an important road, such as a national highway. This may have some advantage for a commercial property but doesn’t add much for a residential property. In fact, having a residence close to a main carriageway (such as NH 8 or Dwarka Expressway) can prove to be a nuisance due to the non-residential traffic, especially commercial vehicles and freight traffic (trucks, trawlers, tractors, oil tankers etc.).

For instance, moving out of Godrej Frontier in Sector 80, Gurugam on to NH8 and jostling with 16-24 tyre trawlers can be quite stressful for a morning office commute. Also, while it may be convenient for entry into an Apartment complex from one side of the highway, it can be extremely painful if approaching from the other side and need to take a U-turn. For e.g. if you are heading from Cyber City to Ambience Lagoon during evening office hours, the U-turn under the Rajokri Flyover can leave you spitting fire.

Myth #2: Buy/invest in property with good immediate connectivity.

Another location usually oversold is one with ‘better present connectivity’. In other words, anything being constructed on an existing well-constructed road is assumed to be better than those on adjacent ‘undeveloped’ or ‘under-developed’ locations.

A good example is Sohna Road, Gurugram. At one point in time it was considered a far better location than the unconstructed stretch of the Southern Peripheral Road (SPR). However, width of Sohna Road is less than 60% of the planned SPR stretch, which means Sohna road will witness slower traffic as compared to SPR in future.

Myth #3: Buy/Invest in property facing a park or open areas.

A very interesting component of property price is the Preferential Location Charge (PLC). We all seem to crave for houses with unobstructed view of parks, water bodies etc. and the builder is more than happy to place a premium on providing you such a view.

But does the additional payment translate into enhanced returns on your investment? Not Really! The only benefit of this preferred location is that its resale may be a bit easier (all other things being equal). Therefore, unless you are buying the property for self-use, it may not be profitable to purchase an apartment at a higher cost due to the applicable view PLC.

Another PLC you should be vary of is the floor PLC. Except for the ground floor and the topmost floor, buyers in secondary market loathe paying a premium for any other floor.

BEWARE OF LOCATION PRICE TRAPS.

1. It is not advisable to buy properties, especially residential, in close proximity to a main carriageway.

2. Do not get swayed by immediate ease of connectivity. It is recommended to look into the long term capacity of these roads. Today’s favored road may become narrow tomorrow and the present ‘kuchcha’ gravel path may turn out to be a wider road as per the master plan.

3. Do not pay premiums for PLC. The impact of PLCs continues to diminish with time and secondary market buyers are usually extremely price sensitive. So if the idea is to hold for longer, then it would be advisable to not buy units with PLC costs.