Every investment involves a certain amount of related risk. But the risks involved in commercial properties must be weighed against potential returns. If these risks are ignored they can result in a bad investment. So, a prospective investor should always take into consideration the risks involved before making the investment.
Risks related to the location
Realty investment primarily depends on the geographical location of the property. As a result of which many Real Estate companies in Chandigarh like the VRS group have started developing properties at a prime location in Chandigarh. The Tier-II cities like Mohali are just the optimal place to put the money in with all the locational advantages that could reap good-great benefits. But conversely, cities are dynamic in nature and what is a prime location now can be empty 20-30 years from now. Locational risks come from the ex vitro factors and on the impact, the neighborhood has on the value of the place. The gradient in the growth pattern has an impact on the desirability and value of a specific property. So, one must carefully select a location that involves the least locational risks.
Inflation Risk
The standard increase in the cost and decrease in the purchasing capabilities which takes place over a period of time is inflation. So there’s always a reasonable estimate in the market and the inflation risk is that expected estimate to be wrong.
Liquidity Risk
As we all know the real estate market is a high illiquid asset that cannot be immediately sold at the market price if the need be. So if someone is looking to sell the property the chances are that the value would clock far below the market value meaning the real estate would be illiquid. Thus degree varies with respect to the category, geographical location, and market cycle.
Interest Rate Risk
The thing people worry about the most is the risk involved with the increasing interest rates. Borrowers suffer a loss negatively due to the rising interest rates. It alters the net present cost of the cash flow from the investment. The increase in interest rates can also cause the present value of cash flow to decrease resulting in the cash flow no longer create an acceptable return.
Management Risks
Without the right management, even the nicest property can become an unprofitable investment. Property managers relay a relationship between the tenants and make choices about the management of the property relating to the lease rate, concession, and also the budget of operating. For success in a real estate investment, good property management is essential.
Space Market Risks and Constructional Risks
The probability that the specific expectation about the market rental rates and demand for space over the investment holding period is incorrect is the Space market risk. This unanticipated gradient in the demand patterns chiefly impacts the assets under consideration.
Also at the time of the construction of the property, there are chances that the construction project takes more time than anticipated and delay the rental income or may cost more than the given estimated budget. These additional risks result in a reduction in the estimated cash flow. But with the Upcoming projects in Chandigarh and Upcoming projects in Mohali by the VRS Group you are assured with timely delivery of the project with no hidden costs. VRS is known for its reliability and it is a RERA certified realty developer who has delivered a number of state-of-the-art successful projects since its inception.
Investment in commercial real estate projects in Mohali or Chandigarh may present many risks but if these pitfalls are taken into consideration then the risks involved in investment can be reduced and can then ensure whooping returns.
