Safe investment tips for first time homebuyers in 2021 by Mr. Santosh Agarwal, CFO on Construction Week Online
Santosh Agarwal, CFO and executive director, Alpha Corp, offers some insights
The festive season is around the corner and prospective homebuyers consider this period auspicious for investing in real estate. Investment in real estate is known to be one of the most stable and secured forms of investment that guarantees higher returns than other conventional investment instruments. The chances of generating better revenue in this sector become stronger owing to factors such as increasing rental yields and appreciation. Higher demand from investors further increases the value of these two factors and at a time when 'first time investors' are finding the sector more promising and attractive, the chances of making profits in the coming years are huge.
The value of a property also depends on additional factors like location, connectivity as well as social infrastructures. Making investment in the sector requires a huge amount of working capital which often include lifetime savings of individuals or even of families, or loans of equivalent value. Lack of knowledge, incomplete research, undermining market behaviours and financial goals can lead to unwanted results. Here are some tips for investors to keep in mind before making a decision to invest in real estate.
Location: For real estate choices “location “ is one of the most crucial aspects that should be taken into consideration before making a purchase. Factors like presence and proposed development of social infrastructures like schools, hospitals, shopping or business centres, entertainment zones, restaurants, wide roads, greenery etc play a major role in choosing a location. Nowadays, homebuyers are even considering buying properties in non-central locations. While looking for investments in emerging locations, factors like distance from nearby cities, future developments and sustainability should be thoroughly analysed.
Resale value: The resale value of a property is a very important factor that one should look at before making an investment. The value of property should appreciate significantly over the years for higher returns. Making a wrong decision on property or location that doesn't guarantee the desired appreciation can become an issue.
Additionally, cost of land and construction and expected inflows on rentals are the other aspects which should be looked into. Investors should clearly define the aim or criteria behind the investment purpose so that the returns meet the expectations or even standards.
Evaluating the returns of existing investors: The homebuyers should seriously look or review the history of transactions related to property or even location if available. This will provide enough information on the land or property value over the period to get a better idea before making an investment.
Background check before investment: Before making an investment, a thorough background check of the property, location, owner and/or developer is extremely important to avoid any future hassles. All the documents related to ownership of the property, hidden charges and paperwork should be checked, to avoid any legal problems or disputes in the future.
Policies: The enactment of RERA now requires developers to register themselves as well as their projects with authority and upload every detail of the projects. This gives power to homebuyers to help them make informed decisions. It also makes developers accountable for timely delivery of projects which is a huge advantage for buyers.