Friday, 29 January 2016

Key facts that make realty an attractive investment option

The question on the minds of a lot of customers has been with respect to the right time to buy. Three key facts make realty an attractive investment option. It offers a monthly return in the form of rentals. It offers a financially stable outlook in the long run. And it offers realistic appreciation over other asset investments.

The objective of the investment should be a more important priority over the timing. The timing of the investment would only be an added factor which occupies lesser significance when compared to the objective. Technically, there is no generalized answer to this question.

Certain prestigious investments in the real estate sector across cities however, don't depend on the objective but they get purchased for the snob value they offer. Hence they get driven more by timing than objective.

An average home buyer should continue to do what they have been doing and not really wait hoping for some drastic change. It would only be prudent to make informed decisions between projects but not on the investment.

It needs to be remembered that there is very less incentive for investment in cash assets as they also get taxed at high rates. The returns earned get eroded by subsequent inflation and fluctuation in the valuation of currency.

The buyer's mood has moved southward consecutively over the past four quarters. There did seem a positive tick in the sentiments around the time of the general elections in 2014 but the situation hasn't improved in reality post that. It has been a pattern that the investor activity has been shrinking over past three years. Investors like to go in where they can buy low and sell high. Price appreciation is on a slow trajectory, so investors aren't able to sell much higher than what they buy. Investment in property is less compelling under these circumstances. This is a common trend line and needn't apply to all markets as we may see exceptional markets and projects at all times performing well.

Real Estate buying patterns in the past 10 quarters have generally seen a change in buyer behavior from optimism to cautious optimism to pessimism and back to cautious optimism. We are now anticipating a stage where the buying moodo meter shifts to the optimistic zone. If someone starts mapping this curve well and relates it well to the economy performance of the country, it can be noted that both go hand in hand. Traditionally, this is how real estate buying has behaved.

Manufacturing growth has been at a low in the past three years. If there is greater impetus on manufacturing that comes in, it will help push the stimulus further and that is when it is possible to see a lot of people being able to come forward to invest in real estate. Manufacturing would enable a lot of people from the bottom section of the society come forward to buying. In fact there is a huge unmet demand for real estate investment which comes in from this sector as developers have primarily targeted the cream of the upper middle class and have looked at improving product propositions for this class. That growth in economy has been on a back foot over past three years is also a reason for developers not being motivated enough to offer products for this sector.

What would make this negative phenomenon change into a positive zone of real buying?

- Would it be leaving more disposable income in the pockets of buyers?
- Would it be a cut in sale prices?
- Would it be lowering of interest rates by the RBI? More importantly the benefit of the rate cut being passed on by the banks to the end borrowers?
- Would it be increasing liquidity availability to the developer at lower rates which can effectively lower sale prices?
Would it be lowering of inflation leading to better cost control and thereby resulting in owner sale prices?
- Would it be increasing availability of raw materials through policy decisions of government?

The key factors in the short run would be leaving more disposable incomes and possibly lowering of rates. A cut in sale price would depend on the context of the project being spoken of than to generalize as in most peripheral projects there is little margin with which developers survive and thereby leaving the option to deepen cut in prices as a very tough choice.

It can safely be noted as interpretations of whether it would be a good time to buy; the answer will always continue to remain a big Yes! In general, real estate investments in India are known to produce returns in long run as opposed to quick return over a span of three to four years. People who enter the market with the intention of being there as long term investors have generally benefited. If not 100 percent, at least 95 percent would believe in this. The remaining 5 percent may be in their journey of value appreciation before they also join the 95 percent audience.

After the World War II, real estate across the world has appreciated by 2-3 percent per annum. The value however has got eroded significantly in the years following the subprime crisis. Today, it looks like the right time again to build momentum on a stable footing and we should all be part of the cycle to reap its benefits.

Source: PropertyatNeoDevelopers.Wordpress.Com

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