A smart investment decision ensures your financial stability and peace of mind. Among multiple investment options, real estate investment is a popular one.
According to a Business Standard report, a common Indian household owns nearly 77% of its wealth in real estate. Undoubtedly, people enjoy buying properties and selling them for instant liquid cash.
But, at the same time, there are people still skeptical about it. Some step aside, considering it a huge capital investment. Some prefer to stay away due to a lack of knowledge and time.
Anyways, very few of them know that real estate investment in India provides multiple benefits. If you, too, belong to that category, this article is for you.
In this article, first, we will discuss the benefits of real estate investment. Next, we will mention the right time to invest in real estate. Further, we will highlight things to remember before buying properties in India.
Owning real estate properties can provide a steady monthly rental income. So, you don’t have to depend on appreciation value only. After the pandemic, educational institutions and offices are reopening.
Due to it, rental housing demand grew by 29.4% Q-o-Q (quarter-on-quarter) and 84.4% Y-o-Y (year-on-year) in Q2, 2022. A report from Financial Express affirms the numbers. The demand will increase in the upcoming years, the experts predict.
Real estate assets appreciate by 5%-6% a year without doing anything except property maintenance. Real estate returns may vary depending on factors like location, property nature, etc. Still, it often beats the S&P 500 returns.
Besides, you can increase its appreciation, unlike other assets like stocks, etc. You can do it through renovations and repairs.
Well, not all renovations increase your home’s value. Sometimes a minor kitchen renovation works well. And in some cases, adding a room or basement is the best option. So, discuss it with a reliable real estate consultant before you begin.
Its diversification potential is one of the major benefits of real estate investment. Real estate holds barely any association with other traditional asset classes. With it, you can create a diversified portfolio.
You can diversify real estate assets in various ways- residential, industrial, and commercial. Also, you can do it by geography or strategies. Research says such diversification reduces risk by 60% to 94% across global real estate markets.
Thus, you can have diversified assets in your investment portfolio through real estate. And it helps to lower portfolio volatility. Also, it ensures a higher return per unit of risk.
Purchasing power of the currency may go down due to inflation or other factors. In that case, a real estate asset can save you from capital loss. Macrotrend data says the inflation rate in India from 2011-2022 was 6.7% on average.
At that time, property prices rose up to an average of 15.1%. It surpassed the inflation figure. 2018 global economic crisis, demonetisation, and pandemic - the list of setbacks till now is long. Yet, the demand for real estate in India has always bounced back.
There is a positive correlation between GDP growth and the demand for real estate. When an economy grows, real estate rents go upward. Thus, a higher capital value appears. It passes some inflation pressure on tenants. And it adds some pressure as capital appreciation. Thus, real estate maintains the capital’s buying power.
Real estate gives ample liquidity options. Loans against properties or LAPs are more easily available than personal loans. Also, they offer longer tenures. Experts expect the LAP market to grow more in the upcoming years.
With reverse mortgage financing, senior citizens can apply for a loan against their properties. For that, they don’t have to give up the property’s ownership.
If you’re not ready for any big-ticket investment, you have REITs (Real Estate Investment Trusts). It allows you to buy small shares of real estate assets. Commercial real estate investing becomes affordable with it. You can easily buy shares of commercial properties and build equity. The publicly traded trusts offer enough liquidity.
Leverage is when you use borrowed capital to increase an investment’s possible returns. Real estate is an ideal way to do it. You can finance real estate investments through debts.
For example, only a 20% down payment on a mortgage can help you get 100% ownership of the house. All you need to do is take a home loan to cover the remaining amount.
Real estate is a tangible asset, and you can use it as collateral. So, financing is easily available for it.
Invest in real estate today, and you can save your taxes tomorrow. There are several tax benefits for real estate investment.
For example, under section 80C, if you take a home loan, you can save up to INR 1.5 lakh on the principal amount. Also, you can save up to 2 lakhs on the payable interest, as per section 24.
Overall, it helps you reduce a high amount of your taxable income through real estate investments. A professional real estate investment consultancy can guide you to make your property investment more tax efficient.
Whether you’re a first-time investor or you’re a seasoned pro, investment is a big decision always. And it is always good to invest in a well-managed system.
RERA registration structures the real estate market well. Also, the overall transactions are now well-documented. Proper legal procedures like stamp duty, etc., take place to ensure safety.
So, this well-organised system relaxes your mind and saves you from the risks of fraud or theft.
Buying Properties at any point in time is beneficial. The recent real estate market trends for the last few years affirm it too.
Anyways, if you’re in your 20s or early 30s, it is the ideal time for you to invest. You can extend your loan repayment tenure and get a lower interest rate. Also, you can have enough time to mitigate your risks.
Well, even if you have passed the specific age range, don’t worry. You, too, have options to get into property investment in India. In that case, you should visit a reliable real estate consulting company. You will get to know suitable real estate investment plans for you.
Indeed, real estate is a viable option for building wealth and equity. But, it comes with certain risks and limitations. Not paying attention to them means inviting hassles in life. So, here are some points to remember while buying a property in India.
First, you should be sure about the purpose of your property investment. Do you want a passive income through rental yields? Or do you plan to live in it? Depending on your purpose, you can plan further.
Once you’re sure about the investment purpose, set your budget accordingly. If it is to get a high ROI in the future, you may have to plan a high budget. Or, if it is your primary residence, you can modify the budget as you like. In every case, remember that you have to pay a certain percentage as a down payment.
Location is a crucial factor for real estate investment. Buy a property in a developing area and get a superior quality of living. Also, the location attracts people, and the attraction creates demand. And when demand goes high, the price increases.
You should learn every detail about the property. It helps you to save yourself from any future trouble after possession. Some major details you need to know are:
Also, don’t forget to verify property papers. You must check the property’s RERA details and occupancy certificate. If you can’t manage everything on your own, take expert help. Renowned property management companies in India can help in this matter.
Real estate investment is surely a profitable investment. It strengthens your investment portfolio, ensuring a high return. You should opt for it at the earliest. But be ready with proper financial planning before you get into it. Poor plans and knowledge can lead to wrong real estate investment decisions.
Also, invest as per your present status regarding income, age, and responsibilities. Ask for expert help from a reliable real estate consulting service if required.
