Thinking About Selling Your Investment In Real Estate? – Is It The Right Time?

Real estate market in the country is going through a period of depression,and thus many investors are in a dilemma whether to sell their property investment now or they should hold it for later. The preceding five years witnessed almost negligible returns from this sector,and in the last twelve months there are not many new project launches even,but the supply is still in excess of demand.So, what shall an investor do in such a scenario?

Let see the different aspect of this scenario and the anticipations

Prices are not hiking up soon

Since, the prices of the real estate projects are in a turmoil, especially because of the excess of supply and stringent rules and regulations of government make it much worse, if an investor has real estate investment in his portfolio, and it needs re balancing, it will be good to sell those realty investment. It is because the prices of this investment might not go up in the recent future at the least. The investor might get an estimate of the price of the property he wants to sell from any other investment of alternative nature. He can also get a price analysis done by real estate professionals to know the exact valuation of the property.

Since the prediction of any asset class’s price is based on assumptions; if one is chasing extraordinary return from highest return generating asset even when it is in turmoil, they might lose money. Investment in real estate means a long-term investment of minimum 10-15 years like in mutual funds, bonds,and other financial assets. If you are expecting to generate a return in a short time from these investment basing your analysis on recent returns of short-term, you might put your investment into a problem. It is better to sell an investment when your portfolio needs so without chasing those unsure return assumptions.

Uncertain Returns

Though the transparency in Indian real estate market has been increasing with the implementation of the policies and regulations but still then the returns are below average and even negative. This is not a sector anymore where you can make abnormal money just by buying and selling properties. For making money in this sector, you need to have a strong foothold and have time in your hand; this is now a long-term investment sector. So, it is unrealistic and illogical to wait for the returns which are not certain.

On a macroeconomic level, the real estate market of India is doing good than before,but due to the excessive supply and less demand, it would take time to reflect that positive effect.

Better Prospects

If you look at it from the investment point of view, it is better to exit this market for now and come back when the returns are more stable. Even if you have to sell the property at a cost 10%-15% lower than the cost price, take the exit. It is because the opportunity cost is high as there is another asset class which is generating good returns. Investors who exit this market 4 years back and invested their money in another financial asset, accumulated high returns compared to this sector.

Other reasons why one must shift the investment into properties to other asset classes at least for now is the rigid RERA Act followed by the unimaginable amount of unsold real estate inventory,and there is no tax benefit on your second home or further investment in properties. For them who have more than 60% of their net worth in real estate investment, they must exit the market soon.

Exiting this market will also help the investor get tax shelter by showing negative returns from the market.

Any chances of holding on to it?

The prices are not going up rather going down because of the pressure being created by RERA deadlines for selling off the inventories. The developers are relaxing their pricing to resale the properties off within the deadline. With the decrease in new project launches, the unsold inventory might get consumed by the end of 2019 (at least a major portion of the same).

The residential segment is making the most losses whereas the commercial real estate properties are in demand especially because of leasing activity. The exponential growth of the commercial real estate segment might drive the residential segment as well as predicted and anticipated but it will take time,and one needs to wait to see it happening.

However, in the residential segment, it might also be a good decision to hold on to the properties for now as the prices are already very low, plus there are discounts being given by the developers to sell the properties. The cycle will turn and once you see the light at the end of the tunnel that is when the demand will be equivalent to supply in the real estate market, decide whether you have to keep the investment or sell it.

(Source- Live Mint)