Maximise yield on your real estate investment

The risk factor in real estate investment lies in the possibility of buying at a higher price and having to sell at a lower one in a depressed market. It is also risky to try time the market to discern the 8216;best8217; time to invest. Much like in the stock market,it is impossible to predict the point of lowest ebb in the real estate market. The danger in delaying investment too long is two-fold 8211; firstly,one may lose out on the best properties,and secondly,the market may pick up ahead of one8217;s predictions,meaning that the lower rates may no longer be available.

Professional investors with an eye on capital appreciation look for bargains on the property market. It is possible to find such bargains even in a boom period,since there are always property owners who need to sell their holdings quickly for financial or other reasons. To know whether or not one is picking up a bargain requires some basic insight into the current state and inherent nature of the property cycle. This cycle takes approximately seven years for one complete revolution.

Having a good knowledge of the local property market 8211; meaning the market in the area one wishes to invest in 8211; is also important,as is sufficient insight into the national and global markets. This is because the trends that drive the global market influence the national market,which in turn has a significant bearing on the local market.

In the current scenario,the Indian residential property market is sluggish because property prices have gone through the roof in cities like Mumbai,while there has been an increasingly slower-selling build-up of residential property developers8217; inventories in Delhi NCR,Pune and other cities.

Another reason is the recent hike in lending rates. This has made it harder for intending home buyers to acquire property,thereby giving a fillip to the rental market.

For individual investors,real estate is always a good long-term risk diversifier that has the potential to generate very satisfactory risk-adjusted returns. Real estate has a low volatility quotient,and also low correlations with stock markets and debt. l

The author is COO,Residential Services,Jones Lang LaSalle India

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