December 03, 2023

Why Your Apartment Investment Might Not Pay Off

Hey Everyone!

Let's talk about why investing in apartments in India might not be the best idea, especially if you're looking at it purely as an investment.

Consider this scenario: you buy an apartment for investment and rent it out. Initially, the rental income looks good. However, as the building ages, newer apartments come up nearby, offering more amenities and modern designs. Tenants are likely to prefer these, driving down the demand for your older apartment. The rent you can charge stagnates or even decreases, while maintenance costs climb as the building gets older.

Comparatively, investing in a piece of land or an independent house often yields better returns. These properties typically appreciate in value because you're not just investing in the structure, but also in the land it sits on. As cities grow and develop, land becomes scarce, driving up its value.

Imagine you buy a piece of land on the outskirts of a growing city. At the time of purchase, the area is relatively undeveloped, and the land is affordable. Over the next decade, the city expands. New roads, shopping centers, and schools are built, making your once-remote plot now part of a desirable suburban area. As demand for land in this newly developed area increases, so does the value of your land. What was once a quiet piece of the outskirts is now prime real estate in a thriving community, significantly increasing in worth compared to your initial investment.

Another important aspect to consider is the initial cost of buying an apartment, especially in major cities. In places like Chennai, Mumbai, Delhi, or Bangalore, apartment prices can be staggeringly high due to the demand for housing in these bustling metropolitan areas. This high entry cost means that your initial investment is substantial, and you'd expect an equivalent rate of appreciation to make it worthwhile.

Sure, if you're buying an apartment to live in, that's a different story. But as an investment? It's a bit like buying a new car – it starts losing value the moment you take it home.

In short, if you're looking to invest, think beyond apartments. Look for assets that have a better chance of growing in value – it could be land, stocks, or even mutual funds. Your future self might thank you for it! 🌳📈💰