Tips to keep risk at bay in real estate investment

01 December 2021

Real estate is one of the most significant assets in several countries, with a greater share of one's wealth going in it than other investment avenues. It is mainly because real estate is a simple asset as all of us live in homes and have some basic understandings of residential properties. Even though real estate seems to check all the right boxes but not all investors are pretty lucky enough to make the most of their property investments. If you plan to invest in apartments in India, you must read ahead as here are some tips to keep the risk quotient minimum.

Learn about the real estate market in various cities

When it comes to real estate investment people, invest quite uniquely than any other investment. For instance, when you are buying a stock, you often don't look at buying stocks only of companies located in your proximity. On the flip side, when it comes to residential property, we become pretty demanding and wish to invest close to where we reside. It makes sense as it was challenging to access information about the real estate market in different locations.

But in today's tech-dominated era, it only takes a click of a button to learn about other markets and localities. It would help if you had a broad perspective because real estate investment is all about proper timing and location, reducing risks and enhancing returns. 

Choose the correct city to invest in

No doubt you would love to have a house in a high-end residential complex, but in the long run, real estate prices are likely to track median household incomes. With the rise in income, the property prices also shoot up. Of course, the best investments can be in cities where incomes and populations are rising, but the property prices are steady. But a general investor chooses to invest in properties where they live or have grown up, and most of the information is gathered through their social network, including friends and family. 

Such investments are often a hit or miss as they don't include such a location's prospects. Your investment is surely underperforming if the city grows at a slower rate than the nominal GDP rate. If you want your investment to do good, you must invest in cities growing in no time.

Understand the micro-market and trends

Besides selecting the city, you also need to consider the micro-market selection to your asset's performance. If you are an end-user, you should choose locations close to most arterial roads or be well connected to a sound public transportation system. Hence when you choose a new residential complex in Rajkot, you need to consider the availability of various socio-cultural infrastructures, including shopping, schools, and hospitals. It would help if you also kept in mind that well-established areas might be less risky. Still, at the same time, you will earn lower returns while coming, and new projects with planned infrastructure can offer impressive returns with great certainty over profit realization and timing.

Select a project based on functional attributes

A few years back, real estate had all the incorrect attributes and the same influence on the buyer's decision. Hence, they chose to buy from developers who had enough resources to keep all the inefficiencies at the primary level. Like any other sector, the real estate sector now emphasises the product offered instead of the developer's ability to handle all the uncertainty. When residential and hospitality complexes are completed, their market prices mainly depend on their location, quality of product and its characteristics, and the future market price defines the investor's profit. As an investor, you need to look for functional aspects of any design to reduce the property's risk of becoming obsolete in few years down the line. When selecting a residential property, you need to consider several factors like floor plans and specifications.

Real estate is a huge asset class, and it is quite popular among investors. You can benefit from the safety, security, and low volatility of this asset class if you exercise prudence and diligence before investing.

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