For any person looking for an opportunity to invest, property or realty sector is the most sought after option. It is difficult not to consider creating an asset that promises a stable and good return on investment. But how safe is investing in properties? What are the limitations and the risks involved? Let’s take a look.
This is one type of investment that cannot be bought in small portions; investment is higher than other sectors depending on the current market price. The associated costs involved are also high in comparison to the other investment sectors such as equity bonds or creating fixed deposits or even buying gold. The pricing of the properties are dependent on the concept of demand and supply. The demands of the properties are always on the rise and help in earning additional income through avenues such as rents, etc. Supply of such properties will be dependent on the ongoing market pricing. Since realty sector and properties are durable in nature, the prices of the properties change as per demand.
When it comes to the risk factor, the valuation of the property needs to be evaluated properly. In some cities such as Mumbai, the valuation of the properties will depend on the current demand of the property. There are many places where it gets difficult to get a good property owing the rising prices and hence, buying such properties becomes a difficult task. The valuation also plays an important role since it creates a scenario of assumptions where potential buyers assume the future price of the property and take decisions whether to invest or not.
Undoubtedly, realty sector is one of those areas which is known to have a tricky financial component. Since the entire investment is through higher amount of money, the transactions are majorly done through petty cash, online transactions, equity shares and borrowed money. It is extremely important to seek legal and financial advice while making the investment and be aware of the policies. There may be many legal issues that may hamper the process of investment and buying/selling of properties.
Another risk factor that one needs to take care of is that of finding or sourcing properties that are in demand and are in process of completion and complete possession. There are many unused and unsold properties in the different areas of the cities that do not get sold owing to factors such as location, under developed areas, etc. It is always better to refer to the real estate agents in such cases.
It is better to evaluate all kinds of risk factors before planning any sort of investment in the real estate sector.