Dos and Don’ts of real estate investments for higher returns

5 years ago

Dos and Don’ts of real estate investments for higher returns

The real estate trends are upward now with the prices steadily growing and the buyers’ sentiments on the higher side. The real estate indices are also high with the market conditions also climbing on the optimistic side. In such a market scenario, the expectations are also high of the investors about the investment.

Undoubtedly, acquiring real estate and properties can be a wealth creation tool but it definitely depends on the market conditions, prices of properties, location, developers and a plethora of other factors. It is also parallelly true that Indian investors and property buyers are more informed now than ever! But even then there’s no denying the fact that they need more information to invest rightfully for more returns on investment. Let’s discuss them in detail!

Rise in investment

According to an Anarock report between 2015 and 2018, the total inflow of investment in the real estate segment was in the tune of USD 14 billion worth of private equity. The increased investment was in the last two years that is 2017 and 2018 compared to 2015 and 2016. The investment pattern also underwent a change in this short span of four years too.

More than 70% of the private equity investment was in the commercial sector in 2018, compared to just 33% in 2015. The investment in the residential sector declined from 53% in 2015 to merely 7% in 2018. As we see the pattern of investment, we can surely attribute this trend to the reformatory changes in the realty sector brought by the government in 2016. Grade A office space demand has increased and along with it, other sectors like co-working and co-living spaces have also added the demand for the commercial sector as well.

The experts believe that landmark policies like RERA, GST, REIT and coupled with all these the relaxed FDI policy of the government has helped in structuring the sector from an unorganized one to a more organized sector with more fiscal discipline favouring growth.

Commercial or Residential Property 

The investment market trends should be carefully studied and the rise in the property prices in the last five years should be calculated both for commercial and residential properties. If the growth of infrastructure is very high along with the growth of residential catchments in the area, the investment in commercial properties can be more profitable. Although notional view may bias you towards any kind of investment the right decision can only be opted through a thorough analysis of the data of five years.

Long or short term

Depending on the data of the market performance and appreciation of property values the investor has to decide whether the investment is for long or short-term. In general, the long-term investments have yielded higher returns on investments and that depends on sudden infrastructure development or a transport facility that was earlier not prevalent. Investigations about infrastructure development and due diligence are one of the important tasks that the investors must conduct.

RERA Compliance & Agreement for Sale

Section 4 of RERA makes the builder responsible for all obligations under the agreement of sale. If your agreement is in the time before the legislation of RERA, making sure that the agreement for sale is RERA compliant is mandatory. If the agreement with the developer is entered into after the enactment of RERA, the existing buyers must ensure that the agreement for sale is as per the guidelines as prescribed by RERA. This would inevitably address issues in case of the concerns where developers violate any of the clauses as stated in the agreement. The registration of projects in RERA is also one of the prior considerations that the buyers need to check before signing below the dotted line.

Protect your investment by protecting the reputation

The reputation of the properties, especially online is one of the duties of the investor and not only of the builder. In case of any deviation of services as laid down in the sales agreement, the buyers and investors are often seen venting their frustrations and anger on social media and the internet. The experts feel that instead of addressing the issue in the right way by approaching the right forum they take recourse to a way that not only tarnishes the reputation of the builder but of the complainant too. This has a drastic effect on the reputation of the property which could stand as an impediment while going for resale or rent.  The simple reason is that a property with a tarnished image is very much unlikely to draw the attention of the prospective buyers dropping the potential of returns through sale or rent.