With prices rising, is buying one a good investment option now?
The real estate market has seen a lot of churn over the past few years, and prices are now expected to rise sharply. Thus, the ever-important question arises again: whether buying a home is a good investment option now.
Property developers’ body, Credai-MCHI, said prices could rise by 10-15% in April due to a sharp rise of 400-600 rupees per square foot in construction costs due to rising inflation in key commodities like steel. and cement, among others.
A Colliers report released on Tuesday also pointed out that the building cost increased by 10-12% on average per year due to rising input costs.
Is buying a house a good investment option?
Many still see buying a home as a good investment option. A study by Godrej Housing Finance (GFH), titled Post “Generation-Rent” of 2022, mentioned that over the past year, one in two women have become much more inclined to build wealth and buy property for investment purposes.
Some real estate experts who Outlook Money also indicated that with home loans still at reasonably low levels and prices generally stable, it would be ideal for someone who intends to buy a house to press ahead with their decision.
For end users, the time has come when the buyer or purchaser is assured of financial stability and can repay long-term debt, says Gulam Zia, Senior Executive Director, Knight Frank India.
A report by ANAROCK Property Consultants indicates that up to November 2021, at least 71,307 projects have been registered under the Real Estate (Regulation and Development) Act (RERA). Formulated in 2016, the RERA aims to protect buyers and boost real estate investments.
That said, the fact that real estate is one of the most difficult to liquidate appears to be one of its main drawbacks as an investment option. Therefore, one should be careful about exposure to real estate, as it cannot be liquidated for a cash emergency. At best, it can be mortgaged, but then this is limited to only a fraction of the value.
Mistakes to Avoid When Buying an Investment Property
The return on investment in real estate, as in any other instrument, depends on the valuation at the time of acquisition and the period or duration of the investment. Also, since real estate is a high-value investment, experts suggest some common mistakes to avoid when buying a home for investment purposes only.
Inadequate research: Research plays an essential role in terms of investment, particularly in housing. Harish Sharma, Founder and CEO of Plinthstone REMA, a multi-specialty property consultancy, says one simply cannot casually buy an apartment and expect immediate results and returns. “The development of the locality, connectivity, crime rate, quality of housing and population, access to highways, public service centers, quality of schools, etc., and general facilities of the region must be assessed,” he said.
Other important things to keep in mind are whether the area’s infrastructure will improve, whether the property is in litigation or another legal issue, and who the seller is. You cannot buy a property in a declining area and expect it to go up in value. It is also advisable to stick to the names of reputable developers,” says Sharma.
Bad expectations: Investors should have realistic expectations when buying real estate. One should think about how he wants to use the property before investing in it. Whether you want to use it to buy a larger property, are looking for rental income, or plan to move in a while, your choice of property will depend on all of these factors. Real estate is not an asset that can be easily liquidated or cashed in quickly. So if the type of property you buy is not what you want, it will negatively affect your returns,” adds Sharma.
Incorrect documents: Documentation is perhaps the most important factor to consider when buying a property. It is possible for people to ignore the documents, and failure to read the entire contract could cause them to lose both their money and the property. Overlooking small details in the contract can have disastrous consequences, with builders often having certain clauses that could lead to long-distance legal hassles in the future, according to Sharma. Properly reviewing the documents to check if they are legit and up-to-date would go a long way towards a hassle-free purchase. The best option would be to have the contract reviewed by an expert before signing it.
Underestimated costs: Underestimating the costs of developing, converting or constructing real estate can result in a loss instead of reaping a profit. Taxes, government fees and registration fees associated with a property should also be considered before investing in a property.
Bad timing of the case: Timing is the key to getting the most out of real estate investments. Most builders offer sales on their products, and waiting for them could see one get a better deal on their investment. The demand and supply situation in a particular location also has an impact on prices, so it is crucial that once the transaction is done perfectly to get the most out of it.
Location – Downtown vs outlying areas
Whether his house is located in the city center or on the outskirts, both have their advantages and disadvantages. Town centers are invariably expensive, but the outskirts offer a more peaceful environment in which to live.
With more people working from home, there is now greater demand for larger homes, even if that means moving to the outskirts. “It has also reduced the importance of the distance between residence and office and the resulting travel time as a factor when a buyer evaluates a potential property to buy,” adds Sharma.
This may also be one of the reasons why the outskirts or satellite towns have experienced a boom in development and infrastructure in recent years. It offers the best combination of a quality of life equal to or even better than that of locations closer to the city center, and the almost negligible congestion and bustle of busy urban areas. The cost of living, including rent, is also lower, adding to the benefits.
Many large companies, especially in the IT field, have also moved away from the city center to the outskirts. Even if they return to work from offices, it makes the outskirts attractive for a landlord.