What Makes a City Perfect for Real Estate Investment?

  • 2 years ago
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Real Estate Investment

A lot of people spend a certain amount of their lifespan trying to earn money so that they can invest the same for a good return in the future. Despite there being several good investment modules, the ones who got lucky all have banked on one module – real estate. Hence, real estate investment plays a very important role in influencing the financial growth or fall of many real estate investors.

Investors predominantly think of investing in real estate only due to the attractive returns that come with it. In other words, the major attraction for investors is the opportunity to make a lot of money in a very short period of time. They determine the attractiveness of a city by assessing its possible income or loss. They are drawn to cities that give them the best mix of size, risk and benefit.

Cities are dynamic economies, and this return is influenced by a wide range of variables. Investors, therefore, consider the attractiveness of a city in terms of a wide range of city characteristics and behaviours, some of which are listed below:

  • Business and job growth rates
  • Infrastructure and it’s quality
  • Strength of the economy
  • Location of the city
  • The scale of the entire city
  • Number of jobs and businesses
  • The population of the city
  • Number of properties available

So, which of the above-listed characteristics were given the highest priority? When investors were posed with this question, it was surprising enough to find that most of their answers resonated. Well, almost. Most of the times, the expectation from any real estate investment varies, but two of them match. They are:

  • A developing city with food economical backing and a good growth potential
  • Connectivity to other cities and means of transport available to facilitate the same

Let us discuss each of these in detail, defining them in the process and understanding why they make a city an ideal investment location.

  1. A strong economy with growth potential

A growing economy is a strong indicator of a literate and growing population that demands more services and businesses, which in turn are followed by offices, houses and shops. All of these are dependent on a constant inflow of investment. This is where investors come in.

Cities with highly-skilled workers and productive and well-paid jobs in innovative and knowledge-based industries are like eye candy for investors. Such places pull the investors towards them.

The infrastructure of a strong economy must be funded and not limited. Investors have to assume that their workers have access and are now regarded as a significant prerequisite for investment to quality housing and digital connectivity.

The rates for capitalization or caps are not included in the metrics of the cities because they vary greatly depending on expenses, and, in turn, the figures for expenses vary by neighbourhood, type of property and the property itself. Expenditure is undoubtedly higher in some cities than in others, but the data is not available readily and hence should be ignored at this point.

  1. Transportation and connectivity

Investors favour a city that is well connected. Connections mean company entry, employees, residents and supply chains, transaction costs reduction, increase of productivity and economic growth facility. Investors also search for opportunities right next to train stations or town centres and bring the inhabitants as close to transport links as possible.

The relative connectivity of the cities to which they want to invest is often not known for domestic investors. Cities should, therefore, promote new or improved connections, to inform investors about changes.

Inference

While multiple factors contribute to a city’s general growth in terms of infrastructure and development, the actual power to control all of these factors lie with the residents of the city and its local governing body. One of such good cities most suitable for investment is Mysuru, Karnataka, India. One of the very few tier-2 cities in the country, Mysuru has carved a separate niche for itself and this factor has contributed most to the accelerated growth and development in the city.

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