One of the biggest constants we've noticed in most customer portfolios during our journey as financial planners is that they are either already real estate heavy, or their high-priority goals include buying additional homes as an investment.
This should come as no surprise: as recently as 2017, real estate accounted for an astounding 84 percent of all household investment assets in India (RBI Household Finance Committee Report, 2017). In the life of the average Indian investor, nice-looking gated communities and plushly-designed apartments play the role of Bollywood seductresses and temptresses. You bought a house a few years ago and have just begun to pay off the principal on the loan when the latest upgrade on the market catches your eye, complete with that extra half bedroom you forgot you needed and the tennis court your current apartment complex desperately needs but lacks.
This is becoming more visible as life returns to pre-COVID normalcy and the economy picks up speed. A conversation I had with a group of friends last week was eye-opening; one of them, who works in construction, confirmed that just in our small Mumbai suburb, there are currently 100+ redevelopment projects in the works, with a similar number expected to be added in the next 3-4 months. There are clearly buyers in the market driving demand for this supply, and demand is only increasing. In other words, real estate is currently looking good as an investment opportunity.
Given that many of you reading this are likely to be among those thinking about buying a house as an investment right now, it may be prudent to consider some of the investment risks associated with this asset class. While this is not an exhaustive list, each risk has the potential to significantly harm your financial independence.
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