Highlights some of the aspects
to keep in mind
What is the most important
factor while investing in property?
Balancing return with the
associated risk is the focal point of any investment decision. Equity and debt
are considered to be the mainstream asset, and risk in both these asset classes
is strikingly associated with high returns albeit with a greater risk score as measured
by volatility. A relatively stable debt investment comes with a larger
compromise on returns.
How do returns from property
investment fare vis-Ã -vis those from other avenues?
From the perspective of return,
real estate investment in India has garnered superior returns in comparison to
other asset classes over a long term. Further, an investment in residential
property is generally done with leverage in the form of a housing mortgage. This
leverage further increases the potential for earning higher returns since the
initial equity contribution is a fraction of the property value.
How can the risk factor the
managed?
From the perspective of risk,
property investment fares better because asset price generally remains stable. It
has been established that an investment in real estate based on sound research
can seldom go wrong. Real estate is an asset class where an educated investor
can mitigate the risk and enjoy the associated superior returns at the same
time. In most cases, investment in real estate is fraught with decision based
on gut feeling and tips which result in poor investments. Hence, an investor
has to clearly delineate a real estate investment from speculation.
From the growth and investment
perspective, zone that have high concentration of business activity at present
and projections of meaningful increment in future will have a comparative
advantage over others that have saturated on this parameter. Regional growth
within a city is anything but even and the direction of such growth is a
critical factor in determining the fate of a particular residential property.
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