Risk in any asset is usually measured by considering historical behaviours, projected growth, and outcomes. Generally, all investment carries some degree of risk. But real estate stands as a beacon of stability amidst economic uncertainties, demonstrating its character as a low-risk investment avenue. During the COVID-19 pandemic, the entire scenario was changed for many industries, and the real estate market was no exception. However, despite the initial setbacks, the real estate sector has managed to bounce back, and the commercial segment has witnessed a remarkable growth in India.
The demand for commercial properties has reached a new high as it provides a passive source of income in the form of rental income. People are opting for real estate as their prime investment option due to its safe and growing nature. Unlike volatile stocks or unpredictable ventures, property value continues to rise and offer steady returns, making it an attractive choice for investors seeking security and high profits.
However, not all real estate investments bring high returns. Investments made without the necessary research and property analysis carry a high-risk probability. As an informed investor, you need to analyse various factors associated with the property. Here are the reasons why investing in real estate is a low-risk option.
Tangible Asset and Intrinsic Value
If there is no investment, there is no risk and no gain. Risk is an unavoidable feature of all types of investment. However, the tangible nature of real estate contributes as a crucial factor, making it a low-risk option. Diverging from traditional financial assets like stocks, bonds, and derivatives, real estate constitutes a tangible asset with intrinsic value. Land and properties with consistent growth patterns have practicality beyond financial benefits, serving as residential areas, office spaces, or commercial establishments. This inherent stability protects the investors by neutralizing the after-effects of market fluctuations and offers solidity to real estate investments.
Market Stability and Growth Prospects
The real estate market is known for its stability and predictability for long-term growth, making it a preferred investment option. Unlike the stock market, where speculation and sentiment can have a significant impact, real estate growth relies on concrete elements like geographical location, Government policies, supply and demand, and the economic activities in the area. These factors tend to change more gradually, giving investors sufficient time to consider their property options carefully and reducing the risk of sudden drops in value.
Rental Income Revenue
The advantage of real estate investment lies in its capacity to generate rental income and create a revenue source that consistently grows over time. This income source effectively counterbalances costs such as mortgage obligations, property oversight, maintenance, and other expenditures and ensures continuous cash influx for investors. Such steady earnings protect the owner in times of economic ambiguity and market reshuffling, encouraging people to invest in real estate. If we analyse market behaviour and growth patterns, real estate emerges as one of the most secure investment options.
Risk Reduction and Diversification
Diversification is a key attribute of real estate that significantly reduces the risk and helps manage market volatility. Investors can choose from various options, including residential and commercial properties, to ensure flexibility and resilience against market variations. A diversified real estate market comes with scattered risks across properties, but it always allows you decent time to adapt to the changing market scenarios.
Investing in mixed-use commercial property, such as IT/ITES projects, shopping malls, Business Parks, etc., opens multiple growth opportunities, increasing the financial capability of the individuals. However, identifying an appropriate property among numerous options is challenging. It requires market research on location, connectivity, prices, and growth possibilities.
Invest in properties that generate cash flow, provide long-term stability and offer an alternate income source. To meet your real estate investment goals, seek expert advice and trust builders like IThum World, which has a proven track record of delivering exceptional commercial and residential projects. The company has several ongoing commercial properties in Noida and Greater Noida, offering premium commercial spaces with top-notch amenities.
Real Estate Investment Risk Factors and Points to Remember
- A Lack of knowledge in real estate investment can result in losses. Therefore, it is crucial to thoroughly check all factors like location, prices, amenities, and terms and conditions.
- Choosing a Bad Location can be disastrous for your investment. Location analysis is a primary need that one should consider when investing in a property. Ensure your investment destination is nicely connected to public transportation and its surroundings are well-developed. After all, the location drives the factors that ultimately create growth opportunities and generate rental revenues.
- Negative Cash Flow means the property owner is operating the property at a loss. A negative cash flow indicates that the expenses such as maintenance, taxes, insurance, and mortgage payments exceed the total rental income. Therefore, being a conscious investor, take note of all these parameters.
- Lack of liquidity- Real estate assets are less liquid compared to many investments, such as stocks, gold bonds, mutual funds, etc. Because real estate usually takes time to sell or buy, regardless of residential or commercial property.
Apart from the above, there may be hidden structural issues, a substandard builder, maintenance costs, and an unpredictable real estate market that can negatively impact your property yield.
Conclusion
To escape from undue market oscillations, real estate is undoubtedly a practical investment option that delivers excellent returns and generates a passive income source. However, no investment is perfectly immune to risk, as several factors impact market growth and returns. A thorough market research considering location, price, and growth potential is needed to ensure high ROI. Remember, always go with a trusted real estate builder, consult a property expert, follow the professional approach, and take a reasonable time before investing to ensure optimal gains.