When making investment decisions for the future, considering the effects of inflation on your assets can help you mitigate the impact of inflation before it silently drains your purchasing power. As the world struggles to recover from the pandemic’s aftermath, countries such as Pakistan are witnessing some of the highest rates of inflation in history. According to a press statement issued by the State Bank of Pakistan, year-on-year inflation in January 2023 reached 27.55% and 2.90%, respectively. Investors have been looking for ways to keep their money from disappearing into thin air. Investing in real estate is one approach that has stood the test of time in this regard. This tutorial has been created to assist you in better understanding how real estate investments can be utilized as a hedge against rising inflation in the country. Before we move any further, it is important to understand the notion of inflation.
What Is Inflation?
Inflation is often described as the rate at which the prices of goods rise over time, but how does it affect the average person? What happens is that while the costs of commodities rise over time, individuals’ income does not rise at the same rate, causing them to pay more for the same chunk of money.
Income-Generating Real Estate Investments
Now, how can buying more properties protect you from rising inflation? The answer lies in the fact that as inflation rises, the prices of properties also increase, which serves as a natural discount and institutional incentive for real estate investments. Historically, the value of real estate has increased faster than the rate of inflation. Real estate investments bear zero to no risks, unlike other investment options such as stocks, bonds, and cryptocurrencies. Not only can you minimize the risk, but you can also make your property work for you by leasing it out, putting it on rent, and selling it on the appreciation. The Pakistani real estate industry provides a unique opportunity for investors to hedge against inflation by providing guaranteed rentals on the purchase of property. For example, Hash Mall, a project by the Hashi group of companies, is offering 12k in rental on an investment of 6 lac rupees for 10 months.
Unlike other investment options available in the market, real estate investments bear very little risk in terms of their returns. But, there are a few factors that should be considered before investing to prevent fraud.
To ensure that your investment is risk-free, it is important to perform due diligence before making a decision. Be sure to look out for reliable agents. It is advised to work with sellers with an established portfolio and market reputation. Always meet the seller face-to-face and look for certification from relevant development authorities.
The prospect of losing your life savings due to shifting global dynamics is daunting, but the Pakistani real estate market provides a rich opportunity for investors in the form of low-risk investments. Although there are some risks in this industry, it has historically done remarkably well as an inflation hedge.