The misconception among people that real estate is one of the best investment opportunities is mostly because of the lack of knowledge about the same. You may hear stories of the increasing value of a house or plot manifold in 50 years. This seems very fascinating and alluring, but when it’s actually not. When mathematically calculated, an increase which is even 100 folds in 50 years results in just 9.6% of increase per year, which is not anything special. However, these gains could have only taken place as per the old system of real investment.
Presently, they can’t take place. If we consider the price of a particular property, there a total of five ways of gains and ultimately the profit made is a product of all these. These five stages of sources in order are –
1.The genuine change in utilization of the land, that is, from agricultural to commercial or residential.
2.The actual development or construction of the infrastructure of land to make it suitable for use.
3.The development in habitat or commercially workable as more people start living in the area.
4.The major changes, that is, the highs and lows, which actually affect the scenarios of real estate market.
5.The usual inflation of the country’s economy that plays a major role in the changing the prices of the properties.
In the past, many years back, when people bought properties, they used to do it on an early stage. Therefore, the gains accumulated from all the sources to them in 20 to 30 years. But now, because of the changing trend, people buy flats from the developers of real estate sector and all the gains till stage three get accumulated with him. And the worst part remains that the developer even wants to get the gains of stage 4 and 5 from the buyer in advance. People get convinced and the developer succeeds in capturing all the stages of gains. The marketing done for the real estate developments has reached a new level and they make you believe that if you don’t invest in and pay for the project today, it will be a big loss to you as in the future, this project will be the most sought-after in the community.
If we talk in the investment jargon, the price of acquiring is at high value that will be achieved in a later future. As a result, it doesn’t matter that the rates of flats in South Delhi may have increased 50 times in 50 years, the flats located in the new developing areas which may cost Rs.5 crore will not yield you Rs.250 crore in 50 years. This is because the developer has already included the increased future value into the present price.
The model of real investment has been modified drastically, and from the buyer’s perspective, it has no modified for the good. And therefore, preferably, people should invest in only one home which he has to live himself.