It’s an abbreviated form of three words, but with the potential to wreck the greatest project ever conceived or built. It is at the center of all investments and decides the fate of almost all investment projects, regardless of size, form, use or importance.
King. short for returns on investment, it drives every investment in every business all over the planet. Including in the field of real estate. And like any underlying cause, ROI also comes with its own set of reasons, some fixed and some variable, based on which the value of investments rises or falls.
Some of the most important reasons for fluctuating returns on investment in real estate are those mentioned below. Taking care of it, inadvertently or not, is one way to ensure a sustained and high return on investment in real estate.
Here it is pertinent to mention that investments in real estate mainly bring returns in two forms. Rental or capital. It is a fact that properties with high rents generate a high return on investment on sale as a source of stable income. On the other hand, there may be assets like parcels of land with structures giving rents that could actually be charges for capital appreciation in their current form and may need to be removed for capital appreciation. capital. That said, there are certain rules that must be followed before you can expect a healthy return on investment in real estate investments.
- A great location! Its best examples are the realities of the tourism industry. If it is next to a busy site including a monument, a lake or overlooking a valley with a breathtaking view, it will always bring high returns on investment. That said, the idea of a location can be quite vague. In the case of a commercial property, high ROI investments could mean being close to easily accessible infrastructure such as transport, airport, train station, banks, other offices, hotels, etc. . Homes should generally be located near schools, parks, offices, and just about anything that helps make life enjoyable now and in the future. Speaking of location, these days even desolate places have value in terms of weekend getaways, retirement homes, investment homes and the like. Unless the property is in a location that is highly inaccessible by any stretch of the imagination, there is always a chance of creating lasting returns on investment due to its location. That said, returns on existing investments can also drop where new and better locations become available elsewhere. The best example of this might be the congested places in most city centers that start to lose value once the action shifts to the suburbs, like Mumbai being a prime example.
- Property with mixed use potential. A combination of homes and offices in the same complex can increase the value of a property in some cases and bring higher than usual returns on investment. Generally, since the pandemic, people prefer home offices and are willing to pay more for homes that can be both home and office. Having houses and offices in the same layout reduces travel time, a big pain in virtually all urban areas of India. Spaces that cater to a mix of homes and businesses/offices will therefore have a higher return on investment. This obviously does not apply to manufacturing and production units, etc., where permissions must be taken and could lead to many legal problems.
- Land close to infrastructure, including highways, train stations, airports, etc. Land near transportation infrastructure is still considered prime property with a high return on investment because it commands consistent footfall, which most businesses in the nature of food, stay, clothing, entertainment, etc. are constantly on the lookout. That said, the effect of a high return on investment begins to ripple outward in times of saturation and unavailability of adjacent land that is not directly near the infrastructure shown. The perfect example might be places like Bhiwandi near Mumbai. Bang on the Mumbai-Agra highway, properties on the highway were highly sought after for storage due to their obvious proximity to the highway. Saturation hitting fast, these days property anywhere in Bhiwandi with reasonable highway access commands a decent price.
- Property forming part of a well thought out residential and commercial complex. The era of the self-contained housing, office and retail complex is upon us. And not without reasons. It makes life easy to be close to all of life’s essentials, without the woes of wading through endless traffic jams. Real estate, regardless of its size, shape or use in any of these self-sustaining cities, will always generate a great return on investment. Famous Pune companies in Hinjewadi, Hadapsar and others are perfect examples. These are virtually entire towns built as a gated community with restricted access. Although their existence and what they bring can be discussed endlessly, one cannot overlook the high returns on investment that property yields here compared to those out of thought in the neighborhood. All for one reason. An ideal location with excellent planning that promises a great life with all the essentials available nearby.
- Property that has a great quality of construction, design and amenities! An apple-to-apple comparison of spaces built in the same location shows that buildings with the latest amenities win hands down when it comes to return on investment. Multi-layer parking, automated parking, access control, rainwater harvesting, green building, renewable energy systems, etc. can reverse the value of any property in its current location. This is also the primary reason why virtually all old structures in most city centers are up for redevelopment. What you get in the end, be it offices or houses, is much better than what you could have had in the past. Rebuilding while generating higher returns on investment also promises preservation of the structure for another half century or even less, another reason for higher value.
High returns on investment occur for certain reasons. That said, these reasons, despite their outward appearance of stability, change for a number of reasons. It therefore makes sense to select properties that have multiple reasons to sustain high returns on investment. Things then become much more stable.
The opinions expressed above are those of the author.
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