Real Estate Investment Selection and Empirical Analysis of Property Prices: Study of Select Residential Projects for Gurgaon, India

Abstract

The paper studies the residential micromarket of the Gurgaon region of the Delhi NCR, India to identify key determinants of real estate investment selection and perform empirical analysis of property prices. Primary survey suggested that developer’s goodwill is the most important factor for investors incase of under construction residential properties (forward projects). Other factors include location, amenities, project density and construction quality. These factors enjoy almost equal importance for selecting completed (spot projects). The factor information can be used to construct property quality rating classes. High risk adjusted returns were provided by high quality spot projects and low quality forward projects. Long run equilibrium relationship was observed between spot and forward prices with the former playing the lead role. GDP and non food bank credit are the macroeconomic variables that can predict property prices. Highest pre-tax Internal Rate of Return was observed for forward projects in first quarter holding itself while for spot projects it was around 8th quarter. The research has implication for property developers, real estate investors and market regulators. The study contributed to real estate investment literature for emerging markets.