Is Property in India a Safe Investment Portfolio?

Investing in property is a mandatory requirement in our society, irrespective of status. For obvious reasons, owning a house is essential for any household. It provides social security, a status symbol and sense of ownership to the entire family. Due to the social insecurities with which our society is redilled, owning a property becomes all the more important and remains the top most priority on the ‘must own’ list of a family. Once the essentials are met, owning a second property becomes an investment proposal. At least in India property is seen as an essential item in any personal investment portfolio. Real estate contributes 20% towards the total individual wealth in India, which is very high for a singular vertical. The main reasons for this over enthusiasm towards real estate have been social security and very healthy returns, over a period of time. However, Real estate in India is infected with its own set of problems and insecurities. A few of the issues are discussed in the succeeding paragraphs.

Long Investment cycle

Investing in real estate requires a lot of energy, effort and time from individual investors. It requires one to study the market, do a lot of research and homework, ground visits etc. before shortlisting a desired property. After that starts the paper work, which in itself is a long drawn process, in case one is raising a loan, this gets stretched further. Further, if it is a primary market investment the wait for possession can be from 1 year to 9 years. Therefore, the entire process from shortlisting to possession is energy sapping, unpredictable and time consuming.

High Capital requirements

Depending on the city, location and vertical (residential or commercial) the requirement of capital is high, as compared to any other investment portfolio. Therefore, the risk factor for an individual investor is also high.

Long Liquidity Cycle

Like the investment cycle the liquidity cycle is also a long drawn process due to the ticket size involved. Therefore, in case of an emergency real estate turns out be the worst investment as it cannot be encashed at will.

The Real Estate Market is Unpredictable

The real estate market is unpredictable on a number of accounts, whether it is quality, quantity, delivery, product etc. One as an investor has to be really careful and check, check and check once again, before, as well as, after putting his money. In the end you need to believe in God and pray that all goes well.

One fails to understand that despite all the drawbacks why does real estate or property in India, remain a lucrative investment option in India?

There are primarily three reasons, one, we have already discussed is the social security; second is that real estate is somehow associated with extraordinary returns, which to quite an extent is true as well; the third and most important reason is that real estate has been one of the most stable markets, not that it has not gone through slow-downs or down-trends, but it has been able to safely recover out of these crisis over a period of time. This gives an investor the confidence that his investments are safe and would give desirable returns over a period of time.