Unlike stock markets, real estate has a low volatility quotient and is often considered as a good investment option. However, an investor putting money in real estate should always look out for maximising yield and capital gains, apart from reducing risks as far as possible.
A recent poll conducted by ConstructionBiz360 has also put forward a similar notion, with 50% respondents feeling that the fundamental aim of a property investor should be to maximise capital gains, whereas the remaining 50% feel that real estate investment can also mitigate risks largely.
“Investors with a long-term view should continue to include property in their investment portfolios and focus on maximising yield and capital gains and reduce risks,” said Mohammed Aslam, COO (Residential Services) at Jones Lang LaSalle India.
To maximise capital gains, a real estate investor should always be on the lookout for buying property cheap and selling it at a higher rate. “To exploit return-on-investment to the ultimatum, an astute investor can also think of buying a well-located property at a high price in case the rental market is booming and eventually sell it out, when prices soar again,” said Ashwani Sigh Virk, managing director of Jagson Realtors, a real estate services firm in New Delhi.
Currently, the property market in the country is experiencing a lag phase as prices have skyrocketed in major locations such as Mumbai, Pune and Delhi-NCR, resulting in low sales. Besides, the steady rise in interest rates has also made it difficult for prospective home buyers to acquire property. These cumulatively have given a fillip to the rental market. “Purchases on the residential property market pick up when lending rates or property prices reduce, because people would rather put their money into self-owned property rather than spend on rent,” explains Mr Aslam.
Furthermore, renovating and embellishing makes a property eligible for a higher rent, which means maximised yield.
The risk factor in a property investment lies in the possibility of buying at a higher price and selling at a lower rate. However, this should discourage investors as the danger in delaying investment too long is two-fold - firstly, he may lose out on the best properties and secondly, the market may pick up ahead of his estimations and the lower rates may no longer be available. Hence, real estate investors should never attempt to time the market accurately, advised Mr Aslam.
Being less volatile than stock market and debt, investors can reduce risks by investing in real estate. Furthermore, property investments act as a good long-term risk diversifier for individual investors and offer them satisfactory risk-adjusted returns.