The literal interpretation of the term “increment” means an increase in the value of something. Increment essentially refers to a process by which the value of a thing increases.
Increment is a term that finds common usage in the real estate industry. Under the purview of real estate, increment refers to the increase in the value of a real estate property over time. It may also be known as an appreciation of the value of a property.
One of the primary objectives behind investing in real estate is to generate attractive returns on such investment. Investing in real estate is a common practice for most investors seeking to earn profitable returns. Now, such returns on real estate investments may be generated through rental payments. Another way of generating profits through investments is by pursuing the process of increment. This essentially means that investors can purchase certain real estate properties and sell them in the future once they have gone through increments and consequently increased in value.
Increment, in terms of real estate property, happens over an extended period of time. Such an increase in the value of properties usually results from changes in the market index. Inflation in the markets can also lead to an increment in the value of certain real estate properties. This typically occurs when there is a higher demand for real estate in the market in comparison to supply. Therefore, when the demand is higher than the supply, there is an automatic increment with respect to the value of real estate properties. There are several methods that can be used to determine the level of increment that a particular piece of real estate has experienced over a period of time. Being able to evaluate these levels allows investors to decide whether to purchase that property or not. It allows them to get an idea regarding the potential levels of increment that a particular property is likely to experience.
According to the National Association of Realtors, the average value of residential properties witnessed an increment of about 6% between the years 1968 and 2004. It should also be noted that in the later periods, the average value of residential homes experienced a sharp rise. It has been observed that the average value of these homes had an increment of over 18% in those years.
Under this context, the levels of increment largely depend on the interest rates, location, demand, and supply, etc.
