For some time now, it's been one investment avenue that's been avoided like the plague. Having scalded their fingers in the mid-nineties when property prices came crashing down, eventually hitting rock-bottom in 1998, you can't really blame investors for treating real estate as a highly contagious disease. So if you're one of those who's been maintaining a safe distance from builders and real estate brokers, well, we've got news for you: There's money to be made from brick and mortar. Maybe not a lot. Maybe not right away. But hey, it's a start.

The good news is that real estate prices are as close as they could ever get to their bottom. After inching up a wee-bit in 2000-01, prices of both residential property and commercial property slipped by 3-4 per cent in 2001-02. In Mumbai, prime residential rates fell from Rs 15,000 per sq feet in 2000-01 to Rs 14,500 per sq feet last year. So for just Rs 12,240 per month, which is what you will pay on a 15-year, Rs 10 lakh housing loan (at the current rate of 12 per cent), you could be the proud owner of a two-bedroom house worth Rs 16 lakh in the Western suburbs. It gets even better in Delhi, where prime residential property rates have fallen from Rs 5,500 per sq feet to Rs 5,200 per sq. feet and in Gurgaon to Rs 1,150-1,200 per sq feet, which means that for Rs 12 lakh you could get a comfortable home in the capital's suburbs. Says Akshaya Kumar, Managing Director, Colliers Jardine: ''The big picture is that the real estate markets are likely to be relatively flat for the next few months, as there is enough supply coming in to keep prices down.''

If you're looking to make some bucks by renting out property, there's no time like now, what with rental yields looking up. According to Knight Frank India, yields on residential and commercial property in various cities range from 5 to 17 per cent. Rentals have grown largely because of the influx of global brands into the country. And don't forget the potential for capital appreciation. Globally, the property market follows the stockmarket with a three-to-six month time-lag. Given that the Indian bourses are looking northwards, property prices too could move in that direction. But don't expect prices to skyrocket in the short term.

"Investment in a home provides a good hedge against inflation" Keki Mistry, Managing Director, HDFC

The biggest driver for real estate looking so attractive these days is of course softer interest rates-on housing loans they're down from 18.5 per cent some six years ago to 11.5-12 per cent. What's more, the fm for his part has been particularly magnanimous in his last two Union Budgets, liberally doling out sops to the housing sector. For instance, interest payments up to Rs 1.5 lakh are exempt from taxable income and the principal payment up to Rs 20,000 is eligible for exemption under Section 88 of the it Act.

If you've decided to buy now, history too is on your side. Even though real estate prices have been declining since 1995, investments made in real estate have actually performed much better than those in gold, silver, the stockmarkets, or even US dollars. If you had invested Rs 10,000 into real estate in April 1992, it would have been worth Rs 36,562 last October. In comparison, the other investments remained more or less stagnant (See How They Compare). Says Ashok Kumar, Director, Insignia Brooke, a Hong Kong-based real estate firm: ''Given the current market conditions, real estate is a better and less risky investment.''

Part of the allure stems simply from the reduced growth prospects in other investment alternatives. Says Pranay Vakil, Managing Director, Knight Frank India: ''Buying property either as an investor or as an end-user is an attractive proposition.'' Consider: Two years ago, while you got 12 per cent yield post-tax on financial instruments, including bill discounting, rental yields were in the 7-8 per cent range. So nobody bought property to rent it out. Now, while the fixed deposits earn 8-9 per cent, property yields have remained constant at 7-8 per cent.

"Buying property either as an investor or as an end-user is attractive" Pranay Vakil, Managing Director, Knight Frank India

Meantime, the risk attached to renting property has come down as well since, as Vakil points out, the chances of property prices falling further are very remote. In fact, there is a likelihood of prices inching upward to be inflation neutral. That's why Keki Mistry, Managing Director, HDFC, feels: ''Investment in a home provides a good hedge against inflation.''

Getting Started

So, if it still hasn't hit you, you are sitting pretty in a buyer's market, and should grab the opportunity when the going is good. Avers Niranjan Hiranandani, CEO, Hiranandani Constructions: ''There couldn't have been a better time to buy a house. Housing finance companies are running after you, there are quality townships coming up with quality constructions, and there is the advantage of supply.''

The timing may be perfect, but that doesn't mean you should proceed with your eyes shut. You may decide to play safe by buying a house in a distant suburb or a small town. That will no doubt work out cheaper, but remember too that the scope for appreciation is limited. On the other hand, if you are based in a metro you may have to shell out a little more, but you could also get a little extra when you sell.

"There couldn't have been a better time for a person to buy a house" Niranjan Hiranandani, CEO, Hiranandani Constructions

There may be enough supply to keep prices under pressure, but don't rule out the chances of selective increases in pockets. That means if you're looking for appreciation, you have to select the right city and the right suburb. For instance, the Rs 30-35 lakh residential market in the suburban belt nationally is buzzing with users buying for the long term. Some of the newer areas in Mumbai, including Mindscape on Goregaon-Malad Link Road, have witnessed price appreciation in the last couple of months, and are protected against any fall. In Delhi, a number of executives are likely to buy house property, especially in Gurgaon and Noida. However, Pune is still witnessing an oversupply of residential property and rental yields here are likely to remain low.

If you are a non-resident Indian (NRI), the Union Budget has given you one more reason to buy real estate. NRIs have now been allowed to repatriate in foreign currency their currency earnings, such as rent, in India. What this means is that if a non-resident Indian buys property in India, not only can he repatriate the rent, he can also benefit from the depreciation of the rupee against the dollar when taking a loan to buy property here. Says Kumar of Colliers Jardine: ''NRIs can get a 2 per cent return on investment with almost no risk by investing in leased out commercial property on a repatriable basis.''

Take a tax break

"Real estate markets are likely to be relatively flat in the next few months" Akshaya Kumar, Managing Director, Colliers Jardine

The tax breaks provided in the Union Budgets are one of the best incentives for investing in a house because, to put it simply, you could earn returns that are higher than your borrowings. Here's how that works: Assume you take a 15-year, Rs 10 lakh housing loan at the current interest rate of 12 per cent. Your monthly installment will work out to Rs 12,240, amounting to Rs 146,880 per annum. After factoring in the tax benefits associated with the loan repayment, and assuming that you are in the 30 per cent income tax bracket, your effective interest rate will work out to 7.78 per cent per annum.

Ergo, your cost of borrowing is 7.78 per cent, and you don't need to be a wizard to earn higher returns than that by putting your money in other avenues like mutual funds or bonds. Most of these instruments offer rates in the 8-12.25 per cent range. So it makes ample sense to borrow and buy into real estate, even as you park your investible surplus in other avenues.

One word of warning: Prices and interest rates may be attractive, but that in no way means there's a quick buck to be made. Real estate, let's stress, is a long-term proposition, and don't dream of taking home any easy money before a year (at the least). But then, wouldn't that be worth the wait!