5 Things to know if you are looking to Invest in Property

The Indian real estate market is expected to touch US$180 billion by 2020. The housing sector alone contributes 5-6% to the country's GDP, says a report published by the Indian Brand Equity Foundation in January 2016. The real estate sector is considered to be one of the most lucrative options when it comes to building a corpus. Ideally, you should buy property when the markets are down and sell when the markets are at their peak. However, to make the most of your investments, you must stay invested for about 7 to 10 years, if you plan to buy and hold. Other than directly investing in property, you can park your surplus money in this sector through REITs and real estate funds in India. The former is a fund that is traded in the stock market, while the latter is a mutual fund that only invests in the real estate sector.

Things You Must Do

Whether you are buying your first property or are a veteran, the rules of investing remain the same. Given below are some property investment tips that could prove useful when you consider investing in this sector.

1. Get Rid of Your Credit Card and Personal Loan Debts: Both these types of debt come with higher interest rates than mortgage loans. They can significantly decrease your borrowing capacity. Decrease your credit card limit or if you don’t use your credit card, you might as well get them closed.
    
2. Choose an Established Developer: You might be lured into buying a house by a new developer in town because of its low price. Don’t be fooled by low prices, go for an established developer, who has an impressive track record of successful projects in the city. Also, look at whether the previous projects were completed on time or not.
   
   
3. Check All Documents: Go through all important documents yourself, such as the title deed, clearance given by government authorities, approval of the building plan, environmental clearances and commencement certificate. If you are buying property that is being resold, make sure that it is not mortgaged via a bank loan and does not have any property tax due.
   
   
4. Shop Around for a Loan: You might be a loyal customer and go to one bank for all your financial needs. However, it is a good idea to shop around for a bank loan while buying property.
   
   
5. Calculate Extra Cost: Apart from the cost of the house, insurance, maintenance, registration and stamp duty, additional costs may arise at any time. Make sure to calculate these extra costs and keep sufficient cash flow at least for one year from the time of possession.

To invest in real estate funds in India, you can consult your financial advisor. They will be able to advise you on the amount of money you should invest, taking various factors into consideration.

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

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

·         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. 

5 Tips on How to Get Good Returns from Your Property Investments

“Buy land. They're not making it anymore.” - Mark Twain

While it is largely true that real estate is a high yielding investment, in order to maximize returns, you need to know how to invest in property. Returns are largely volatile in the short term and one needs to make astute decisions to make the most of them. While current housing prices in India are in a slump due to higher supply, most property markets are expected to see turnaround and start pricing in a volume recovery in second half of 2016, said the Bank of America Merrill Lynch report. This is according to the article published in Economic Times on October 9, 2015.  This good news for those who are looking to invest in property in the near future, as long as they adhere to some basic property investment tips.

property investment

Essential Property Investment Tips

Upcoming Area: Real Estate is a high yielding, low risk investment, if you know how to invest in property. The best thing to do is to invest in an area that is growing instead of an already established area. The chances of value of properties in such areas appreciating are higher, as most popular areas reach a price plateau after a few years.

Value-Adding Amenities: If the property has recreational amenities nearby, its value is bound to increase. For instance, if it overlooks a park, or if it has a mall or marketplace nearby, it is a good investment to make. It is also a smart idea to go in for a property that is at its nascent stages of development with concrete plans of such amenities in the near future, as the chances of making a larger profit on it is higher.

Easy Access: One of the factors that push the price of real estate is its accessibility and proximity to public transport. If there is a metro station at walking distance, you can be sure it will be selling at a prime rate. If you invest in a property that is on the future route of the metro line, its value will increment considerably.

Schools and Hospitals: This is an essential factor that effects the marketability of your property. Most people who are looking to invest in real estate are those who are looking to settle down. Having hospitals and schools at close proximity to their home will on top priority. If your investment offers these facilities it will definitely not lack prospective buyers.

Business and Job Opportunities: Long commutes have become the norm in metropolitan cities. Therefore, properties that are closer to business hubs and corporate companies are sure to be in high demand. This is one of the most useful property investment tips to be kept in mind, as it has maximum bearing on value appreciation.