Hello friends.
We are now seeing some
financial schemes structured as commercial real estate investments. As investors, it
is our duty to understand a few facts before evaluating such investments.
1. Why would somebody price the property more
than double the price of a similar property next door?
2.
Why would somebody
promise to pay the rent from the very next day of investment, even though the
building is not ready yet?
3. And, the rent is also more than double of what
is the running rate in that market.
The first tenet of
investment of any kind is to keep it simple (KISS).
Given the tight tax
benefit scenario for real estate investments created after the recent budgets, People
would tend to look at such
commercial propositions and land deals favorably.
The question is - what is the value proposition for
you and the builder?
If you're thinking this could be a scam and might
not end well, I am with you. But, pray that everything should be fine for those
who have put in the money already.
Don’t bank on the media
to call out the risks of such investments beforehand, mass media is only interested
in what is HOT. They would surely come in with all guns blazing after the scam drowns
many but not when it is in the making even though they know it.
It is our duty as
investors to fight this war
alone. If all of the above sounds something like a
Multilevel marketing
scheme starting with Axxxxx and Qxxxx etc.it is not a coincidence. Check if the builder is
making payments for past projects from cash flow coming into the current
project. I hope RERA is tight enough to monitor this kind of cash leakage.
As an investor, everybody
would think that they would have made a smart investment. But unfortunately, in
this situation, the customer needs loads of luck and prayers for the smarts of the
builder / agency to pull the scheme off without hurting anybody.
Capital preservation
is the need of the hour, if capital is allocated to the right product, returns
will come – it could be a matter of time. In a hot market, plan for guarding
the capital, leave alone over the top (OTT) returns.
Thank you.