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2BHK – Best Real Estate Investment

Real Estate Investment
Real Estate Investment

Real Estate Investment is one of the most favorite investment option for Indians. Recently, one of my client Sweta Gupta from Mumbai was planning for Real Estate Investment. She already own a 3BHK flat in Andheri (Mumbai). Now she is planning to invest 1.5 Cr in real estate with sole objective of capital appreciation. Her biggest dilemma is which unit size is best for investment i.e. 1BHK, 2BHK or 3BHK. Another way to look at it is that in her budget she can buy either 3 units of 1BHK or 2 units of 2 BHK or 1 unit of 3BHK. Real Estate Investment is very tricky and any wrong decision can spoil the party.

Every unit size has its own advantages and disadvantages. Real Estate Investment should be based on logic, reasoning & proper research. Before i share why 2BHK is best Real Estate Investment option let’s check why 1BHK and 3 BHK are not the best options for Real Estate Investment.

1BHK as Real Estate Investment: The biggest disadvantage of 1BHK is that target audience of 1BHK is people from lower strata of society. Normally investors would like to deal with middle class. 1BHK is not preferred for Real Estate Investment as you may face issues while renting out or getting your house vacant. Moreover you will find 1BHK flats only from small time builders with dubious reputation. Any decent or known builder will not provide 1 BHK flat in the apartment complex. There are other reasons also like burden on common amenities, people prefer to stay with similar income group etc. 1BHK is normally bought by end users. Lastly, rate of appreciation of 1BHK lags behind other unit size therefore investors don’t prefer 1BHK for Real Estate Investment.

3BHK as Real Estate Investment: One factor which work against 3BHK is rent differential. A 3BHK may cost 50% more than 2BHK but rent differential is hardly 20%. It is not ideal scenario for investor. Even though investors buy for appreciation but potential rent earning is key factor while deciding unit size. These days builders are playing very smart. You will find 3BHK of 1200 sqft which is technically ideal size for 2BHK. By converting 2BHK to 3BHK, he play with Psychic of a person and charge premium. A 1200 sqft 3BHK looks congested and is very difficult to rent or sell. 3BHK is still considered luxury and target audience is very limited. For 3BHK, target audience is mostly family with 2 Kids or with old parents.

Best Real Estate Investment

No prizes for guessing…The award for best real estate investment goes to 2BHK unit size. Some of the factors working in favor of 2BHK as best Real Estate Investment option are

(a) Target Audience of 2BHK is much wider compared to 1BHK and 3BHK unit size. Typical Target audience is Nuclear family with or without kids / Parents. With the changing socio-economic dynamics of the society and swelling migrant population, the demand of 2BHK’s will sky rocket in coming days.

(b) Affordability is another major driving force in favor of 2BHK. 2BHK is very easy to rent or sell due to affordability. Even Big & Reputed builders like Brigade, Hiranandani, Mantri etc have increased share of 2BHK units in their upcoming projects. Some builders are even launching projects with concept of Premium 2BHK units which are intelligently priced between normal 2BHK and 3BHK.

(c) Two is better than One: If you are buying a 2BHK purely from investment purpose as in case of Ms. Sweta Gupta. The two units of 2BHK will have much higher capital appreciation compared to one unit of 3BHK. It is purely based on demand & supply scenario. Moreover rent from two units of 2BHK will always be much higher compared to 1 unit of 3BHK.

(d) Be Practical: One of my friend working for reputed MNC bought 3BHK flat in Bangalore. I advised him to go for 2BHK as his job is mobile i.e. he is company’s favorite for overseas assignment. As i anticipated, within 3 months of buying 3BHK he was deputed on overseas assignment for 3 years. He found difficult to rent 3BHK and compromised on rent. He is getting rent almost equivalent to 2BHK. It is advisable to buy 2BHK if your job is mobile. 2BHK can be easily put on rent or sell.

(e) Last but not the least, The maintenance cost of 2BHK is lower than 3BHK therefore recurring hole in pocket is less. 3BHK of bigger size with maintenance based on per sqft model will drastically increase monthly maintenance charges thus net rent received will be less. In short, higher maintenance charges means lower net rent received.

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Copyright © Nitin Bhatia. All Rights Reserved.

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Aravindhan
Aravindhan
10 years ago

Whether 2BHK flat @1045 SQ.FT is best compared to 3BHK flat @1345 SQ.FT in area like chennai

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  Aravindhan

Please let me know the psf rate and also how much rent you may get from 2BHK and 3BHK.

bighnaraj
bighnaraj
10 years ago

Hi Nitin, Between a Duplex buying in a slighly upcoming remote location(having 2600 plus sqft land) vs a 3 BHK flat in same price in upmarked areas of the same city which one should you prefer?

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  bighnaraj

You need to check all the development activities planned for upcoming location. If you find that this upcoming location will be developed in next 5 – 7 years time then i suggest you to go ahead with Duplex.

Yogen
Yogen
10 years ago

Hi…Sir I am planning to buy 2 BHK home at the cost of 43 Lakhs Rs; Right Now I am a owner of 1 BHK Flat in Kalyan; I am selling my existing 1 BHK flat to my younger brother; So my question is Can I sell him my flat and can he avail the Home loan from bank; I am very confuse.Pls Guide me

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  Yogen

You can sell your flat to your brother like any other property transaction provided it is not an ancestral property & your brother will be paying you for the same. Your brother can avail Home Loan to purchase your flat.

Yogen
Yogen
10 years ago
Reply to  Nitin Bhatia

Thank you very Much,Sir

Yogen
Yogen
10 years ago
Reply to  Nitin Bhatia

Sir, IDBI bank is refusing the home loan to my younger brother; Can you suggest me a name of bank where my brother can avail the home loan;

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  Yogen

Please let me know the reason. If it is because of your brother’s home loan eligibility then other banks may also refuse.

Yogen
Yogen
10 years ago
Reply to  Nitin Bhatia

Sir, I (Yogendra J. Wagh) am selling the flat to my younger brother (Kiran J. Wagh) at the cost of 30 Lakhs,As per his Income he have sanction the loan about 22.5 lakhs and he is going to give me a rest of payment i.e 7.5 Lakhs from his savings; IDBI bank is saying that bank can not issue the home loan because we are brothers;

Sir its not a eligibility issue;

Does any Act says such transaction can not be happen? Can you suggest me a name of bank where my brother can avail the home loan;

Nitin Bhatia
Nitin Bhatia
10 years ago
Reply to  Yogen

Though there is no such rule but it depends on Bank to Bank. You may check with Private Banks like ICICI Bank or Axis Bank

Binoy
Binoy
10 years ago

nice article! keep going

Vivek
Vivek
10 years ago

Great post! Very informative Nitinji.

amar
amar
9 years ago

Nice Post.
Hi Sir. . I am 25 years old, lives in Pune. I am planning to buy an apartment.I have two options either buy 2 Bhk with home loan of around 35-36 lacs for 15 years in some outer area like Ambegaon, Dhayari or Narhe. My second option is that I can buy 1BHK with home loan of 25 lacs for 7-8 years in somewhat inner area like Bavdhan or Vadgaon Budruk. Now, I have a question which option should I choose. Should I go for a 1 BHK and sell it after few years or should I buy 2 bhk ?? Please help me out . Thank you in advance.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  amar

Please let me know potential rent from both 1 BHK and 2 BHK. From rent, i can judge the potential demand.

amar
amar
9 years ago
Reply to  Nitin Bhatia

@ Ambegaon, Dhayari and Narhe – rent for 1 bhk – around 6000-7000 and for 2 bhk – 9000-10000.
@ Vadgaon Budruk, Bavdhan – rent for 1 bhk – 11000-12000 and for 2 bhk – 14000-16000.

Just to let you know, I am buying this for my own rather than as an investment. And as per my current requirement 1 BHK is enough for me but I am considering 2 BHK option because I would need that after lets say 5-6 years. But considering loan amount and interest on that. I am bit confused.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  amar

2BHK in Ambegaon, Dhayari or Narhe seems to be better option.

Jyoti
Jyoti
9 years ago

Hi Nitin,

I have a concern as I was interested in buying a new home of 2 bhk which should have much space (not congested) but most of the flats I have seen is equivalent to 1 bhk.

So I preferred to go for 1 bhk ( not congested).

Please comment.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Jyoti

These days average 3BHK size has shrunk to 1300 sqft and 2 BHK size is 900 sqft. From property valuation perspective 2BHK will score more compared to 1 BHK even though 2BHK is bit congested. Lastly, you will always need 2nd room in house either for guests or as and when you decide to expand family. I will prefer 2BHK.

Sumit Kejriwal
Sumit Kejriwal
9 years ago

Hi Nitin

First of all, congratulationfor developing nice website and posting knowledgable post.

I will be very happy if you can answer my query, which is related to home loan and its tax benefit. I am sure this should be new query for you as weel.

I have taken home loan of 23 lakh in FY2013-14. I am first time buyer and my home cost is less
than 40lakh. so basically i qualify for the additional deduction which was introduced.

i will get possession of house in December 2014. I have been paying EMI to bank since May 2013.

Now my query is:

1) Please tell me tax treatment for principal as well as interest amount.for pre-construction period.
2) How can i avail additional 1 lakh deduction u/s 80EE (Newly Introduced )
3) I have heard this 100,000 interest deduction can be carried forward. but can you please explain in my case. Is it that for me i can claim to an extent of 2,50000 every year as interest deduction.

Look forward to your answer.

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Sumit Kejriwal

I have already answered this query. Please do not post duplicate queries. Thanks.

Nalin
Nalin
9 years ago

Dear Sir, your site is quite informative. I have a question for you. I have the potential for buying a three BHK house or go for two one BHK houses. I feel two 1 BHK houses if located back to back could give you larger area and also more rooms. Moreover joining the drawing rooms can give you a large drawing room. Moreover there will be two toilets which will be added advantage. Pse give your views about this option with pros and cons. Will the maint charges be more in this case? Respond Please. Thanx. Nalin

Nitin Bhatia
Nitin Bhatia
9 years ago
Reply to  Nalin

I will suggest 3 BHK. Any structural changes by joining 2 units back to back will create problem in future and it might weaken the overall strength of the building structure.Moreover a 3 BHK unit will definitely have 2 washrooms and overall space utilization will be better.

Venkatesh Adicherla
Venkatesh Adicherla
8 years ago

Dear Sir,

I have three choices, confusing to choose a lot.

1) 1 BHK (850 Sft penthouse, Awesome interior done). But the land is in some disputes. But builder is as per new GO’s of government registration can be done using BRS scheme. But bank loans will be not be available. But there are lots are apartments are there in disputed land. Most of flats are taken by lump sum amount. Flat is actually good, i am so much attracted to it. He is quoting 23L (Rent may come 10K if rent it out). One of my friend is already took a flat (2BHK) in that building paid by lumpsum amount. The builder is actually the friend of my friend.

2) 3 BHK (1450 sft). This is an apartment built as per GHMC Norms by the same builder. Just half a kilometer away from the above. No loan problem, no registration problem. Quoting 43L (Interiors & registration etc). As he friend my friend he is giving 100 persft concession comparatively others in the same location. The locality is right now developing, means constructions (Mostly all 3BHKs) are going on.

3) 2 BHK in the same location (as option 2) with any other builder as per market value (If it is 1000sft, price may be 31L).

My circumstances are like i am a 28 aged guy, not yet married. In future my parents may come after 5 to 6 years to my place. planning to marry with in 2 years. And I can get the loan up to 40L if required. And i can afford 23L lump sum now. But i will be out of money after paying that. I am feeling like as i am single i can opt for the first one luxurious 1BHK. But what if prices raised a lot after 5 years when i wanted to take 3BHK…What about the resale values of all.

Please suggest.

Nitin Bhatia
Nitin Bhatia
8 years ago

Considering your requirement and current situation, I will prefer option 2 of 3BHK. I will not suggest disputed property and 2BHK will not meet your requirement after few years.

Venkatesh Adicherla
Venkatesh Adicherla
8 years ago
Reply to  Nitin Bhatia

Hi sir, Thanks for your suggestion. But revisiting all my requirements and circumstances and based on the suggestions of my family members and friends i am only choosing 2BHK option.
I have a couple of options for 2BHK. Requesting you to suggest the best option for this investment.

1) 1160 sft 2BHK North Facing Independent builder floor apartment. Quoting around 35 Lacs . Hand over will be approximately with in 3 months.

2) 930 sft 2BHK East facing, a gated community high rise (19 floors) flat. This is a very big community having more than 2000 flats. project started almost 4 years back. but very slow progress. As per the customer reviews builder was always skipping the handover dates. The flat what i was prepared, he is committing 9 months to hand over. But definitely it will take min one year. This flat is in 10th floor. He is quoting 40.5 lacs (including amenities, parking..this is itself he is saying around 5.5 lacs). Amenities include swimming pool, club house..etc.etc.

What is the best investment for both staying , rental value and rate of appreciation for resale. please not that location wise both options are almost in same location, just 1km meters distance. Gated community location is bit nearer to MMTS station.

Thanks in advance..!

Nitin Bhatia
Nitin Bhatia
8 years ago

Prima facie option no 1 looks ok to me.

Vijay Trivedi
Vijay Trivedi
8 years ago

After paying agreed amount as per the agreement (payment schedule) against the flat, if builder denies to give NOC due to some extra amount as an “compensation” called “disputed amount” is they can do so ?

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