Why is buying a house a bad investment today?

Buying own house is every Indians dream and there is nothing wrong in this vision. After all, home is one of the basic needs of human life. However, the trouble starts when people get obsessed by real estate and go all out in making realty investments. In doing so, they forget the basic principle of diversification and invest all their money in property market. While, this can turn out to be a good decision in absolute long term, it can even backfire in medium to short term if the realty sector goes through a correctionor the market sentiment turns negative or the government comes out with some kind of law that is harsh on the sector. Hence, it is important to exercise caution when it comes to making decisions pertaining to property investment.

Property purchase should only be done following proper due diligence and research. The process must also take into account all of the administrative procedure, legal framework and return on investment. At the same time, it is also important to transact through a source that is credible, trusted, authentic and above all branded. One such medium is Housing.com, India’s leading online real estate portal to feature100% verified and genuine properties.The site also provides its users with thousands of properties that are amongst the best in market within all budget ranges, with all facilities and in all localities including property in Faridabad, Delhi, Mumbai, and 100 plus other cities across India. Having said this, over investment in any sector, be it equity, debt, bond, securities, gold or real estate must be avoided. This is because it can negatively impact in the long run. Let’s see why –

Limited infrastructure

Infrastructure is one of the biggest challenges in Indian property market and this is true across the spectrum. Nearly 65% of Indians believe that the facilities provided with their homes are inadequate and do not match their expectations. This includes basics such as parking, security, elevator, corridor walkway, etc. Also, the transportation facility to and fro from the workplace and educational institutes are poor and there are no proper healthcare facilities either. Additionally, there are several big projects developed in far fringe localities that do not even have proper eateries, restaurants, malls, departmental stores, etc. and investing in such project is filled with risk as there is no timeline to when will the original infrastructure come in.

Return on investment

Investing excessively in properties can also negatively impact the return on investment in the long run especially considering the point that the realty rates are not rising but multiplying every few years. This has rendered the average home buyer out of the market and eroded the customer base. As a result, liquidating the assets will become challenging unless the government comes with some method to streamline the price rise and arrest this issue.

Conclusion–While, property is and will remain a good investment in medium to long run, over leveraging must be avoided at all cost. Hence, it is advisable that an individual on an average must not have more than 4 to 5 real estate assets spread across different segments.

2 Comments

  1. The world ” real estate” made the customers to think that land and houses are infallible reality of the market, but it is quite contrary to that assumption. When the recession was hit on the U.S., it was hit straight at reality market at first, then its domino effect began to spread across. While watching the plunged property values in some States of the U.S. like
    Nevada, Arizona, Florida, Georgia, South Carolina, Michigan etc, it will surprise us all; and the mere false confidence in the real estate market is now openly challenged. In the State of Georgia alone, 72 major and minor bags went under, which was the highest in the nation.

    The great depression of 1929 was caused basically upon the extreme saving mentality of the people. But, the recession which was started by the end of 2007 end in the U.S., then began to spread to the Eurozone countries, then to China and now affected every nook and corner of the world was through another misguided trend of the consumers all over the world. Since 1980, the consumers began to live beyond their income; thus began to live in debt and the financial industries began to loan money to millions of unworthy lenders. The wealth of the world began to shift from the middle class to the rich corporations and the rich people, thus the extreme polarization of the wealth was taking place which was not noticed by anybody.

    85 richest billionaires of the world have more material assets than half of the world population at the lower level, that is 3.6 billion people. 1% of the richest people in the U.S. is holding 95% of the wealth. How this formula can work out for long? Now the world economy is moving like a rudderless ship in a wild ocean.

    The plunging of the oil price, commodity prices, gold etc are finally going to hit the skyrocketed real estate price all over the world, especially in India. And its aftermath will be hitting the Banking industry very severely. The oil producing countries, due to the very high inflated oil price became too rich, the consumer countries lost trillions of dollars. Now, that scenario will be rapidly changing.

    Expatriates working in Saudi Arabia is 9.1 million, Bharain .7 million, Kuwait 2.4, Qatar 1.9, UAE 8 million. The foreign remittance by the people working in those countries is follows. India $ 36.2 billion, Egypt 13 billion, Philillians 10.3, Pakistan 8.7 b, Bangadesh 7.3 bill. Those countries mainly depending upon the foreign remittance in their nation budget
    are Yemon 86%, Egypt 73%, Jordan 66%, Sudan 63%, Pakistan 59%, Nepal 57% and Bengaldesh 53%.

    As the oil and commodity prices are plunging, the real estate value plunging in the Asian countries would be very critical, and that will repeat another Wall St. drama of 2008 in the Asian countries.

    • A. S. Mathew, your comments to certain extent are correct but some figures are incorrect. For example the total UAE population is under 7 million and expatriates are roughly 80%, so you have the figures.

      What do you mean by 72 major and minor bags went under, you mean banks, well US had far too many banks than required, hence it was a good correction I suppose.

      Oil prices are currently low and expected to touch $40 per BBL in the short term and eventually expected to climb to $65 to $85 range, currently economies are at lower end of the bell curve and change is expected. At the current Oil prices Indian property rate are holding, when Oil prices start climbing, prices will climb, India is stage animal as every Indian wants to buy at least one house unlike other parts of the world.

      So those who have cautiously invested in realty and specially in land will have no cause to worry.

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