Simple metrics that can help you assess, as a real estate investor, whether property prices in a certain region are quoting at attractive valuations or not.

Real Estate was the passion of Indian investors till 2011, post which they went into an extended slump.

We now see activity picking up again after the RBI’s actions to counter the economic impact of COVID has brought borrowing rates to multi year lows.

Here are three simple metrics that can help you assess, as a real estate investor, whether property prices in a certain region are quoting at attractive valuations or not.

Price to Rent Ratio

An important metric is the “Price to Rent” ratio for a given region. Here’s how it’s calculated – divide the quoted price of the property by the annual rent that it commands.

a fair investment grade range for most urban areas in the country; implying that the said property is still quite overvalued!

QTS (Quarters to Sell)

When demand is rampant, and lenders are lenient with their purse strings, real estate development flourishes.

Since real estate development – starting from land acquisition and going on to the actual construction – is a heavily cash intensive affair, the industry is heavily dependent upon the availability of capital.