Options for investing proceeds of investment property sale.

[fnln510]

I purchased an investment property in Pune 5 yrs ago to hedge against property price rises in the event of my R2I. I finally R2I'd in May of this year but instad of Pune, I wound up settling in Mumbai where I'm presently staying in a rental.

I have been recently thinking about selling my Pune property so that I can purchase a residence in Mumbai. I am told that if I do this within two years of the investment property sale , I will not have to pay cap gains on the gains from the investment property sale.

However, the dilemma is that everyone is saying that Mumbai property prices have gone to unaffordable levels and will correct in the near term (or at least stay flat).

Assuming this to be likely, one option is to sell my investment property and invest the proceeds in high yeilding FD's, corporate bonds and a small portion in stocks for a period of two years so I can make like 10-15 % returns (= 20-30% over two years) while I wait for Mumbai prices to correct. Even if prices in Mumbai dont correct and stay flat, I would still have more capital at the end of two years to purchase a bigger flat or in a better area. The only loss making scenario would be if prices in Mumbai go up at a higher rate than what I'm able to make on my investments.

First of all is it even possible delaying the payment of cap gains for two years with the intent of residence purchase? If so, can the proceeds of the investment property be invested in socks, bonds and FD's or do they have to be invested in specific instruments (like government cap gains savings bonds or NABARD bonds) for this two year period?

If this is a complex problem to solve, can someone here please recommend a good CA or tax consultant in Mumbai whom I can consult?

[shanmugam.d]

IMO, If you do not invest the capital gain either in capitan gain a/c or capital gain bonds (section 54EC) you have to pay the capital gaing tax :(
Also, considering the cost of your rent for 2 years, buying aproperty immidiately after selling your pune property will be a good idea..