Real estate is an attractive investment avenue for many people in India due to rental income and value addition to the invested property over time. Those who find the stock markets complicated opt for real estate investments or they invest in both. Real estate investments are typically for the long term, as in most mutual funds and stocks. Some people also invest in real estate for the diversification of their retirement portfolio. Real estate assets can be liquid or illiquid, depending on their locations and people’s preferences as they all have different requirements for a property.

Here are some key risks associated with reals estate investments:

Fluctuating Rates: A downside in real estate investments is that you may not immediately get a buyer for the selling price of the property or what you expected. Property prices may vary depending on the market condition, house prices, and bank home loan rates. Therefore, real estate investments have both advantages and disadvantages. You might have to bear losses if you want to sell the property at short notice during an emergency. Residential properties, however, are good investments due to rate appreciation over time depending on the locality or the neighbourhood, accessibility and development around that area.

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Illiquid: Real estate assets are not easily liquid due to the huge capital requirements, and the selling process takes time, depending on certain factors. Additionally, documents for sale approvals, like the structure’s suitability and bank declaration confirming its debt or no-debt liability, can take weeks or months. You may find it tough to arrange all the documents at short notice during emergencies. Nonetheless, real estate, such as a shop or an apartment building, is a good investment for personal or commercial use. However, it may not suit those needing cash at short notice. Real estate may be a poor choice for some people due to its illiquidity.

Other Considerations: Many factors can make property investment an asset or a liability. For instance, if a farmer wants to buy land, he will consider the land’s fertility, proximity to a natural water source, location, past land use, etc. If an individual is looking for a house, they’ll consider the locality, neighbourhood, accessibility to schools, parks, malls, general stores, hospitals, etc. If a property doesn’t satisfy your requirements, you may either have to skip or compromise on the shortcomings.