9 reasons to invest in apartments
We are in unchartered territory and have never witnessed this kind of crises before in our lives. The Govt of Pakistan has taken unprecedented steps to enhance economic activity through construction industry. On 17th April 2020 a presidential ordanance has been issued to confirm the construction relief package as announced by the Government earlier.
For past few years we have been advising everyone to diversify and do not invest blindly in underdeveloped areas, today you exactly know why.
What we are seeing today is actually the continuation of policies of the Government for some years now. Today it makes perfect sense to diversify our investments into developed areas including High rise which are at the center of Governments construction sector relief package. Apartments are not the only option for investment but they surely are one of the best option available as of today.
Let us have a look at 9 reasons why you should consider diversifying your investment in apartments .
Reason No 1: Governments Construction Relief Package
Governments construction relief package is surely going to have a huge impact in the construction sector specially the high rise. There is a huge amount of black money in Pakistan laying dormant due to restrictions in the past few years. Now it will find a way back into our economy. One of the major areas where it can be easily invested are these apartment buildings.
In all likelihood if the black money money flows in this segment than we may see a rise in prices of apartments in general.
Reason No 2: Easy installment plans
Apartments usually come with an easy installment plan thus it is easier for any one to invest even if they do not have a 100% payment upfront which is usually the case in developed plots etc. Installment plans also give you to the flexibility to invest your black money for the next couple of years till the entire project is completed.
Reason No 3: Flexibility
There are a lot of options available in the market right now when it comes to apartments. You can invest in low, mid or high end apartment buildings. In addition presently we also have options to invest in commercial apartment buildings such as Downtown Mall etc or hotel apartments.
Reason No 4: Diversification
Diversification is one of the key ingredients in a successful investment . Various options available from reputable developers makes its easy to diversify and lower your risk. You can invest in residential or commercial apartments and can even find similar projects in the same surroundings from different developers.
It also makes perfect sense to diversify your investments into a fourth segment, the other three being plots, houses and commercials.
Reason No 5: Low entry point
Your apartment may cost millions but you just need a handful amount to start with your investment. This comes in handy as you can pay the balance amount over usually 2, 3 and some times 4 years of time. Even if you have the money I always suggest not to pay up front, it is just better to keep the balance in your bank savings account and earn the profits while paying the installments from day one.
Reason No 6: Lower risk exposure
You exposure to risk is limited, when your investment is diversified and you have only invested a smaller portion of it upfront. Unlike certain under developed areas where you have to pay 100% cost upfront and thus exposing your entire investment to high risk.
Reason No 7: Rental Value
Apartments now a days offer great rental returns and almost twice as much from renting out a house or commercial. There are now even fully serviced solutions which offer you a fixed rental guarantee such as Downtown Mall offering you 7% and Madison square offering you up to 11% in rental returns. However even if there is no rental guarantee, apartments usually are rented out at a better price.
Reason No 8: Better ROI
Investing in apartments can just work some times like the leverage in stock markets. As you are investing a small portion of your amount upfront, in case of increase of real estate prices in the general area, you will get the benefit on the entire property regardless of how much you have paid so far.
Smart investors have used this to there benefit through short selling and at times gained more than 40 to 50% per annum.
Reason No 9: Market demand
The market has shown a lot of potential in recent days when it comes to high rise and the demand of apartments has soared high. This has motivated many developers to start newer and better projects. Even bigger developers like DHA have joined the trend and started off with multiple apartment projects.
The demand is generally driven by consumers who see apartments as an affordable and hassle free solution. In addition the hotel apartments concept is famous worldwide for a very rewarding rental model. This has given rise to both end users and investors who are pushing the demand higher.
However like any other investment you can not just blindly jump into it and need to find out the best & safest areas where you can park your money. I therefore recommend that you carry out an in-depth study and find out the best options for yourself and your future goals.
Captain (Retd) Shahnawaz Yaqub Bhatti
Investment Consultant and CEO at Imlaak
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