Investment mantra
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Rajesh Vishwakarma, a 38 year’s old IT professional, bought a residential plot in Gurgaon’s premium location at a whopping Rs 2 crore in 2015. He invested all his savings in buying this plot, expecting some quick gains in a couple years.

He was advised by someone that the plot in a certain locality will witness a growth of at least 25% in a couple of years. That is why, he bought this particular property. It was a big-ticket investment and he had played all his cards on it.

Alas, the prices did not move an inch in the past two years and his investments are somehow stuck in a channel which is not generating any returns. Had he invested such a big amount in ordinary bank deposits, he would have earned at least 7 percent interest income per annum.

What really went wrong with Rajesh?

He actually entered an overheated market where there was hardly any room for further appreciation.

Real estate investing is an art of identifying the right opportunities at the right time. It is a game of timing. But a large number of investors are not able to factor in this most critical aspect and they fall in the trap of investing in an overheated market which does not provide them any returns.

In fact, at times, many properties in the ‘bubble’ zone face the risks of depreciation in value.

How to identify an overheated market?

If you are planning to invest in real estate, you have to shortlist the following:

  • Type of property: residential or commercial
  • If residential: plot, apartment, independent floor, villa, etc.
  • If commercial: office, retail, shopping mall property, industrial, warehouse, etc.
  • Locations: central or suburb, for instance
  • Budget
  • Payment plan: fully self-financed, partly financed, etc.

Once you decide on the above factors, you need to move ahead with the real ground work. You can take assistance from credible property brokerage companies like Investors Clinic and make a list of properties that match your requirements and aspirations.

You must tell your property broker to provide you historical price trends of the localities that you shortlisted, at least for the past 5 years. Cross-check the trends and data facts with the local residents and make sure that you are not buying a property at price levels which are already too high and do not leave any room for growth in the near term.

For instance, do not end up buying a 1,200-sq ft apartment at Rs 2 crore in Gurgaon. How many people will be interested in buying a 2BHK at this price point from you? The property may have n number of advantages but you need to be practical.

Choose your own path and do not follow the ‘herd’

If you are buying from investment perspective, it matters that you buy it at optimum price levels.

Never buy a property in a market where a lot of investors are already there. At the time, when the properties at such locations start showing some vibrancy, investors throw open ‘sales’ boards and then it becomes a competitive market for sellers where demand exceeds supply.

In short, do not follow the herd. Create your own path and you will be in a much better position to clock superior rate of return on your investment in real estate.