The Indian Real Estate sector is now witnessing a big comeback as the demand for properties in the residential as well as commercial sections is growing at a good rate in many mega-cities of India. Conductive and progressive market conditions, increasing economic sentiments, and a fall of interest rates are further motivating the real estate market in a very positive direction.
There has been an increase in renewed investor’s interest due to the accelerated real estate market in recent times. Not only the homebuyers but investors are also attracted to the real estate market in large numbers because of the search for better returns.
However, one should always remember that, just like any other financial market, the real estate market is also not exempted from risk. There are many types of risks involved, like market, economic, and builder-related risks in the property sector. To get higher returns, then it is important to make your investments safer. It is also very important to have a good risk management plan in place.
1-Market Analysis: It is vital to study and look into the market prior to making any kind of investment in the real estate sector. It is advised to the Investors that one should always know about the demand potential, supply-demand situation, coming trends in the market related to real estate and more so that you can analyse the possible appreciation. They should also study more about the physical infrastructure’s state, nearby developments, business/IT parks, business catchments, social infrastructure, and so on. A good market analysis and study can provide investors with a wealth of useful information.
2-Geographic Diversification: When investing in multiple properties, it is preferable to diversify geographically rather than focus on a single market. Regional differences were always there in a country like India, notwithstanding overall trends. It is always better to invest in multiple geographies, which can help to limit risk while also ensuring a larger return on investment. Before investing in various geographies, it is advisable to do good research and gain information on specific geographies’ prior performance.
3-Asset Diversity: To lessen market and economic risk, one should invest in a variety of assets, similar to geographic diversification. Investing in a variety of assets, including residential, commercial, retail, and warehousing maximizes overall results. It will lower the risk across assets, limiting the total impact of any potential slump in a certain category.
4-Checking developer credibility: Over the last 5-7 years, developer credibility has become increasingly important. There are numerous examples of initiatives that have stalled as a result of non-credible developers. Even though huge developers fail, dealing with a reputable name can greatly lessen the risk.
The functional component of any project, which has utility, floor plan, design, specification, and so on, must be well verified, just like the developer’s or builder’s trustworthiness. Most of the time, a high-end and high-quality project will attract more investors, buyers, and tenants, resulting in more profits.
5-Assess your Time Horizon: Real estate is a tangible asset that necessitates a great deal of patience. In contrast to the stock market, to gain the rewards of a real estate investment, one must have a medium to long-term time. If one can hold a property for a long time, the risk of cyclic hazards is considerably reduced, and one can divest when the time is right. As a result, most of the time, it’s a good idea to assess risk appetite and time horizon.
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