Real Estate Investing
MODULE 7: Real Estate Case Studies, Lesson 3
Centauras Case Study
Adnan Ul Haq
Module 7:Real Estate Case Studies
Centauras Case Study
Adnan Ul Haq
This is Centaurus’ case study that is located in Islamabad. This will surely help you if you are looking for an example of investing in real estate.
When these apartments were launched, do you remember some 5 to 6 years ago, at that time, the price of these apartments was PKR 2 crore - 2.5 crores. They launched the apartments at this value approximately. However, the value of the apartment that was PKR 2 crores then is now at PKR 6 to 7 crores.
Meaning in just a few years, the same apartment that was of PKR 2 - 2.5 crores is now of PKR 6 - 7 crores. Now see, the person who invested at that time now has such an expensive and lucrative asset built on it.
Nowadays, if you search for the rent of these apartments, it is approx. PKR 4 lacs which is a very big amount. This kind of income is the best as the owner who has purchased it, or has invested in it, is not working but earning the income passively.
If someone buys the same apartment now, what rate would he get? If we consider its rate to buying ratio, meaning he buys it for 6 to 7 crores, and it gives 4 lacs in rent, the ratio is only 0.6 or 0.5 percent. But if someone has invested at that time, if we consider that rent to purchase ratio, it makes about 1.6 percent ratio.
It's a very big amount! He is receiving 1.6% rent every month. Notice how big of a jump and increase is in the property.
But what is to be learned from this example? The supplier was good, the location was right, and the person invested in the right place at the right time. People who invest and buy at the right place and at the right time make money.
When you buy property somewhere, you have two major expectations from it:
- You expect that the property’s value would be appreciated.
- You expect that its rent will increase.
Rent also has a general rule that it increases 10% every year. For example, if the apartment was of PKR 4 lacs, the increase of rent every year will be about 10%. It will be PKR 440,000 next year, and it continues increasing like this.
In every under-construction project, you get the gain instantly as soon as it is developed, but when you buy an already constructed property, you may have to renovate it according to yourself, and then you can rent it or live in it.
Also, you can choose the location of your choice because under-construction projects have many options. You also get more appreciation for under-construction properties. One is the normal appreciation, and secondly, you get developmental gain as well.
However, you must take care of the following points:
- The first thing you should consider is research properly. Research whether;
- The location is proper
- The society is approved
- What are the technicalities involved?
- What is the past history of the developer?
Like in Centaurus’ case, the developer was already well-known, so his history was good.
- Secondly, you must review its title. Is the title in the developer’s name? Is there any issue with the title? Check the documents properly and especially whether the title is proper or not.
- Third, you must visit the site. Is the site’s location good? Because you can never change the location of a property. You can modify the building or renovate the apartment, but you cannot change the location.
- The fourth thing is the timing. Consider the given timing. Is the given project timeline realistic, or would he just get the down payment and stick with the project for 5 to 6 years. In the case of Centaurus mall, the project delivery was very timely. The developers stayed true to the development plan, and no one faced any problem.
- You should consider whether it is approved by proper authorities or not. There are different approval bodies in different cities. For instance, it is LDA in Lahore, likewise CDA in Islamabad. Whatever authority is in that area, check if the site is properly approved by it? If it is properly approved, then you will not have any issues.
- Review the payment plan if it is according to your comfort. If it is, then well and good. However, if it is not, then you can always get the place in installments.
Like in Centaurus’ example, who do you think would have given the amount of PKR 2 or 2.5. Crores in cash? Very few people! Others opted for the installments option. But even when paid in installments, the person has built his PKR 6 to 7 crores worth of asset that is receiving instant appreciation.
So these are some minor things that you must take care of. If you also want to invest in this type of property, you must consider the above-discussed points for a successful investment.
Otherwise, you can consult any property agent for this purpose. But do look for new opportunities and under-construction projects and invest in them if you want to be a rich person!