Anuj Puri, Chairman – ANAROCK Property Consultants
Real estate investors need to be an exceptionally canny lot, since various factors can negatively affect the value of one’s real estate assets. Being aware of these – and making suitable provisions and allowances for them – is an inalienable part of successful property investment.
The rising cost of money
Increasing inflation is the first factor that inhibits the profitability of a real estate investment. While investing in any kind of property solely for capital appreciation, one should always consider what the overall earnings would be worth at the point in time one wishes to liquefy them.
If one fails to plan for the inflationary effect, further property purchases may be out of reach – rendering the whole concept of real estate investment an exercise in futility.
A simple method of establishing whether inflation will erode one’s real estate investment is to determine if the interest rate earned on one’s savings is less than or equal to the rate of inflation. If it is, it means that your real estate investment too will suffer because of inflation.