Real Estate Investment-Know its Risks and benefits
The real-estate market is a high-risk market that has been aggrandized purely by how unexpectedly large its returns can be and is dependent largely on perception. For instance, someone who bought a house in Whitefield in Bengaluru in 2005 has seen his apartment's price quadrupling to give huge returns. However, many industry experts and portfolio advisors suggest that even unexpectedly large returns are on expected lines when one factors in inflation, increasing guidance values and more. Keeping tabs on ready reckoner rates in Mumbai for two decades, for instance, can give you a fair idea of what to expect in the next ten years or so. In fact, the most unexpectedly great returns are those that are made in a short span of time, such as 5 or 6 years. This obviously involves huge risks as well.
Investing in real estate
Investing in real estate involves a different approach from buying a house. In many cases, advisors say that people who buy houses rarely sell them, due to the emotional value of owning a house. Investing in real estate on the other hand, involves having more flexibility and exercising practical decisions. Unlike other investments, real estate involves a lot of time, money and commitment and the extra returns justify the extent of the investor's involvement. Unlike the stock market, which shows a point-by-point and day-to-day performance of the market, the real estate industry is decidedly more difficult to track. Real estate investment also means less liquidity and the profits that are made are not booked immediately as in the case of equities or selling stocks.
Any form of real estate, whether it involves development of property, private real estate funds, investing in houses or more, is dependent on risk that can hopefully translate to returns that matter. While it is important to be careful in terms of making a low-risk purchase, in this scenario, it is important to invest in or buy property with a clear view of its value and appreciation in the future, whether that appreciation is significant or huge.
Unlike buyers of homes who are cautious, investors are willing to take the plunge and invest in different types of property. Residential real estate, for one, has been growing steadily in most markets in India. Despite being overvalued, the residential market in a place like Delhi or Mumbai, for instance, do not get corrected as severely as other assets and hence having your money in a property is a good bet, as long as you are fixed on getting those extra returns. Even in 2011, which was a bad year for the economy, prices did not plummet in the eight major real estate markets in the country. Even with places like Faridabad, Gurgaon and Navi Mumbai emerging as alternative markets, the prices in the central business districts in the major cities are stable and the demand is high. Between 2008 and 2012, despite the downturn in the markets due to the 2008 financial crisis, real estate in India remained stable, with 11 out of 15 Residex cities giving positive returns in that time frame.
The risk associated with under construction flats
Real estate investment involves minimizing risks as much as possible and it is important to keep in mind that buying an under-construction flat, for instance, involves the risk of credit and lending money to a developer without the knowledge of whether or not he or she will finish the project on time. In fact, industry experts say that given the amount of risk you incur when buying an under-construction flat, your returns should be better. It is always imperative to keep an eye on the returns when investing in real estate, for nothing else is as important.
Buying a house is a societal need as opposed to an investment, which focuses on the monetary aspects entirely. Even among investors, the ones that invest in thousands that turn into millions, the returns come not immediately but after a certain point of time, and liquidity becomes tight. Active investors, on the other hand, understand the risk and the need to diversify their portfolios and stay in the game at all times.
The ground reality of investment in real estate is that even the high returns are those that are to be expected if all other calculations are made prudently. For instance, if you purchase a property in 2015 for Rs 2 crore and this grows four times in four decades, this appreciation is not unreal keeping in mind inflation, the capital gains tax, registration fee and all the other investments that go hand-in-hand with it.
Happy Investing
The real-estate market is a high-risk market that has been aggrandized purely by how unexpectedly large its returns can be and is dependent largely on perception. For instance, someone who bought a house in Whitefield in Bengaluru in 2005 has seen his apartment's price quadrupling to give huge returns. However, many industry experts and portfolio advisors suggest that even unexpectedly large returns are on expected lines when one factors in inflation, increasing guidance values and more. Keeping tabs on ready reckoner rates in Mumbai for two decades, for instance, can give you a fair idea of what to expect in the next ten years or so. In fact, the most unexpectedly great returns are those that are made in a short span of time, such as 5 or 6 years. This obviously involves huge risks as well.
Investing in real estate
Investing in real estate involves a different approach from buying a house. In many cases, advisors say that people who buy houses rarely sell them, due to the emotional value of owning a house. Investing in real estate on the other hand, involves having more flexibility and exercising practical decisions. Unlike other investments, real estate involves a lot of time, money and commitment and the extra returns justify the extent of the investor's involvement. Unlike the stock market, which shows a point-by-point and day-to-day performance of the market, the real estate industry is decidedly more difficult to track. Real estate investment also means less liquidity and the profits that are made are not booked immediately as in the case of equities or selling stocks.
Any form of real estate, whether it involves development of property, private real estate funds, investing in houses or more, is dependent on risk that can hopefully translate to returns that matter. While it is important to be careful in terms of making a low-risk purchase, in this scenario, it is important to invest in or buy property with a clear view of its value and appreciation in the future, whether that appreciation is significant or huge.
Unlike buyers of homes who are cautious, investors are willing to take the plunge and invest in different types of property. Residential real estate, for one, has been growing steadily in most markets in India. Despite being overvalued, the residential market in a place like Delhi or Mumbai, for instance, do not get corrected as severely as other assets and hence having your money in a property is a good bet, as long as you are fixed on getting those extra returns. Even in 2011, which was a bad year for the economy, prices did not plummet in the eight major real estate markets in the country. Even with places like Faridabad, Gurgaon and Navi Mumbai emerging as alternative markets, the prices in the central business districts in the major cities are stable and the demand is high. Between 2008 and 2012, despite the downturn in the markets due to the 2008 financial crisis, real estate in India remained stable, with 11 out of 15 Residex cities giving positive returns in that time frame.
The risk associated with under construction flats
Real estate investment involves minimizing risks as much as possible and it is important to keep in mind that buying an under-construction flat, for instance, involves the risk of credit and lending money to a developer without the knowledge of whether or not he or she will finish the project on time. In fact, industry experts say that given the amount of risk you incur when buying an under-construction flat, your returns should be better. It is always imperative to keep an eye on the returns when investing in real estate, for nothing else is as important.
Buying a house is a societal need as opposed to an investment, which focuses on the monetary aspects entirely. Even among investors, the ones that invest in thousands that turn into millions, the returns come not immediately but after a certain point of time, and liquidity becomes tight. Active investors, on the other hand, understand the risk and the need to diversify their portfolios and stay in the game at all times.
The ground reality of investment in real estate is that even the high returns are those that are to be expected if all other calculations are made prudently. For instance, if you purchase a property in 2015 for Rs 2 crore and this grows four times in four decades, this appreciation is not unreal keeping in mind inflation, the capital gains tax, registration fee and all the other investments that go hand-in-hand with it.
Happy Investing
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