Given the fact that the costs of property has risen at a healthy pace of about 15% per annum over the last couple of decades, investing in this asset has been on the rise and nobody seems to bother about such escalations. For every price there are buyers/investors. The innumerable offerings by numerous builders and developers is a mirror for such push and pull attributes that is based on demand to own real estate.
One of the main reasons for such a phenomenal growth of this asset can be attributed to the fact that people want to own more than one property, either by way of empty plots/sites or built houses/apartments.
The need to own multiple real estate assets has almost become an insatiable thirst coupled with, perhaps, greed which probably is to ensure that they would feel more financially secure with multiple properties across locations.
While only a handful of people would have the capability to own more than one property, the real problem arises when a middle class family decides to own an additional property. It is a fact that almost 90% of investments are done with the help of a bank or financial institution by way of taking home loans, and the repayments could range from 10 years to 30 years.
Individuals should refrain from lure to own multiple properties and look beyond real estate and seek other investment opportunities to invest.
Real estate is not a liquid asset and also is not tax-friendly. Moreover, the annual rise or returns on investment will not be consistent and it could not even beat inflation. Even the rentals may not be enough to meet the EMI outflow. One has to grow organically by way of a good asset allocation of investment portfolio. An asset bubble of the size of U.S. subprime in India could erase all the notional gains. Prudence is important before investing in a second property.
Balaji Rao
