Tuesday, 2 February 2016

What to Consider while Investing in Real Estate

Investment in the real estate sector stood at close to Rs 53,000 crore in 2015, a seven year high, according to a report published by The Financial Express in December 2015. The year also saw regulatory changes in the sector, such as increased allowance for FDI and the approval of the Real Estate Bill. The performance of the sector is expected to pick up in 2016, according to another article in The Financial Express in December 2015. Both property and real estate funds in India make good investment sense.

real estate funds in India
real estate funds in India

Tips to Consider

Among the host of investment avenues, real estate is one sector that stands out. Conventionally, investment in this sector was done for capital gains, but with the introduction in REITs (Real Estate Investment Trusts), short term gains have been made possible. Here are some real estate investment tips you can consider.

real estate investment tips
real estate investment tips

·         Know the Property – If you are buying a property directly, then you must enquire about the developer, their previous project completion and sale records. You must also gain knowledge about market rates, legal procedures, and terms and conditions of the contract.

·         Make an Estimate – While calculating the capital appreciation and returns on a property, you must take into account the inflation rate, the maintenance cost, insurance cost, loan repayment, and taxes. It is wise to buy a property only when the return rate exceeds the inflation rate, taking all other factor into consideration.

·         Invest through an Agency – You can avail advisory services of a financial company. This will save you the hassle of ensuring the credibility of the deal. They will not only help you zero in on the right property at a great price but will also help you with the legal procedures and loan procurement.

·         Invest in Real Estate Funds in India – Unlike equities, which are governed by market movements, real estate is a fairly low risk investment and is completely unrelated to other types of assets. It helps you diversify your portfolio and strike a balance. Real estate funds in India invest in real assets and you can benefit immensely from long-term capital appreciation.

·         Invest Through REITs – RIETs have been recently introduced in India and it has made investment in this sector highly approachable and liquid. REITs are the sector’s equivalent to equity funds. They are funds that invest in commercial income generating properties. They commit to the property for about 10 to 15 years or more. Unlike conventional investment in this sector, REITs do not require you to park a huge amount of money at a single time. The rental incomes generated from the commercial properties are distributed amongst the investors. Moreover, you can look forward to appreciation in your earnings in the long-run, with the capital appreciation of the property held by the REIT. You can either invest directly in REITs or through real estate funds in India. 

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