Common Risks in Investing in Flats in Calicut and How to Manage Them

Calicut is a great place to settle down thanks to its cultural diversity, emergence as an IT hub, natural beauty, and vibrant food scene. It’s one of the reasons why flats in Calicut are becoming a hotspot for real estate investments. 

While they can be pretty lucrative, they do carry risk, like any other avenue. Before you take the plunge, it’s important to understand the common risks in investing in flats in Calicut and how to manage them.

Economic, Financing, and Market Fluctuations

The real estate market is volatile and goes through ups and downs frequently. Demand may suddenly rise or drop depending on external and economic factors; there may be an economic slowdown or boom; environmental and political events can create panic or push demand. All these pose a risk to the real estate investors. Interest rates tend to fluctuate and can impact the cost of financing property purchases substantially. With a rise in rates, your borrowing costs will go up, and demand for flats may also come down.

The converse may happen if interest rates come down. This is why you need to have robust real estate investment strategies in Calicut. They will help you mitigate your risk and even help you make gains.

Solution

Make sure you follow the real estate market trends and have emergency funds ready to cover unexpected expenses because of market fluctuations. Take investment decisions after doing your due diligence and careful consideration of all factors that can impact your property value and returns. Careful financial planning, like conducting stress tests of economic models against different interest rate scenarios, consulting financial experts, and diversifying your investment portfolio. Looking out for flexible financing options and vendors who are ready to offer better terms is also important.

Regulatory and Legal Risks

Real estate dealings are subject to a number of laws and regulations. Legal issues regarding contracts and boundaries (which are often a grey area) are also likely to crop up. It is essential that you have a deep and clear understanding about these risks and make your investment decisions accordingly. The most common risks in this category are:

• Title issues and property rights
• Zoning regulations
• Licensing requirements and permits
• Changes in tax and assessment
• Regulations regarding free space, FSI, and boundaries that change frequently

Solution

It is recommended that you consult a lawyer to understand these risks and proactively handle them to avoid compliance issues. Educate yourself about the laws and regulations by reading up and keep copies handy to deal with tricky situations. Ensure that all contracts are scrupulously examined before signing.

Property Maintenance and Deterioration

Any property that you purchase is bound to have certain maintenance issues sooner or later – just as for your vehicle or any other asset. It is imperative that you maintain the property well to keep getting returns from it. You will need to paint your flat, get the furniture polished, do a deep cleaning once in a while, repair leaks, cracked tiles, problems in the wiring or plumbing, and so on.

Solution 

Create a plan of proactive preventive maintenance checks at specified intervals. Resolve problems as they crop up to avoid bigger problems in the future and protect your property value. Keep aside funds for maintenance and repair work, and hire reliable property management agencies or contractors.

Liquidity Risk

Real estate is not a liquid asset; in fact, it can take some time to liquidate property. If you need funds quickly, it may be difficult. This is one factor you may need to consider when you make real estate investment strategies for first time buyers in Calicut. Entering the real estate market is easy, but exiting is not so simple.

Solution

Diversification of your investment portfolio is a must if you have liquidity concerns. Ensure that you have some funds in fixed deposits or equity, which you can quickly sell to get funds in hand. 

Credit Risk

This risk can be high when you are letting out your flats on rent. While it is a great avenue of generating a stable fixed income month on month, you run the risk of your tenants not paying rent on time, or even defaulting for months on end. They may be wilful defaulters, or they may be going through financial difficulties. This is something that can happen all of a sudden and take you unawares. 

Solution

You must conduct a credit and background check when you receive applications from prospective tenants. Spreading your risk over a few different tenants (if you have multiple properties) could be a good option. Again, portfolio diversification is important so that if one asset is underperforming, you can get income from other assets.

Conclusion

We can see that portfolio diversification is one of the best ways to mitigate your real estate investment risk. When done right, investing in flats in Calicut can get you excellent returns. 

PVS Builders is one of the leading builders in the city with affordable, elegant, and superior 2 and 3 BHK flats in the best residential localities.