A typical retail investor can think about gaining experience by investing in stocks. But this is not the case in real estate.
Our thinking is old and we don’t know how real estate works?
The real estate market is not as clean or fair as the stock or bond markets. There are many anomalies in this. It does not run in a fair or transparent way. Perhaps many of you disagree with me. In such a situation, it is important to understand what is meant by a properly run market?
A properly run market is one in which there is transparency. Information can come and go easily. Know what is being sold and sold. Be clear about demand, supply, pricing and transactions. If there are all these things in a market, then the buyer and seller get help in making the right deal. Their confidence increases that they will get what they have agreed to. It is important to note here that trust is as important as getting something in reality.
It is absolutely true that financial markets are also not perfect in this case. There are also discrepancies in the context of small companies and very few trades. However, there are still no flaws in the real estate market. On top of this, the problem is that ordinary people who do not have a professional connection, rarely get involved in real estate-related activities.
A typical retail investor can think about gaining experience by investing in stocks. But this is not the case in real estate. This makes it a puzzle for many people to invest in real estate. There is no talk of buying an apartment for yourself here. This is being said in the broader scenario of investment in property.
Strictly speaking, there is a big difference in the market that operates in a proper and improper manner. That is how information is flowing in that market and how reliable that information is. This is what the market really is. There is an equal need to understand this information coming and going in the market. This is also a problem with the real estate market.
Most of us are old on how real estate works. This model was true several decades ago. However, the way real estate developers work has become outdated.
What was the old model of investment in real estate? In this, there were five sources to make a profit due to an increase in the price of the property. The final profit was decided by mixing all these. First, the conversion of agricultural or wasteland to residential or commercial use. Second, the coming of some big infrastructure that used this land for new things. Third, the increase in residential or commercial viability as the population of the region increases. Fourth, the boom in real estate from time to time. Fifth, general economic growth and the rate of inflation in the economy, which together have been fueling demand and prices.
In the days of fathers and grandfathers, people who built houses saw value rising in three or four of these phases, or sometimes five. From the beginning of 2000, real estate developers tried to make a profit in the five phases of these five. Even by showing future plans, he was also recovered from the valued customer in the fifth phase. This is completely different from before. At that time, less developed areas were searched to build houses. Plots were bought there. Once this happened, nothing could go wrong and the rest would happen automatically. It was a good investment because it was a bargain at the right price.
Interestingly, now something similar seems to be happening in this business. After 4–5 years of stable prices, the corona epidemic has changed the real estate market for sellers. Developers have given up the dream of ever-increasing prices. This can be said at least for some time. After Kovid, they have probably realized that there are two aspects of the market. One wants the buyer and the other who wants the seller. The deal is in the middle.