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.

Does It Make Sense for Me to Invest in Real Estate?

According to the Ministry of Commerce, the Indian Real Estate market size is expected to reach $180 billion by 2020 from $93.8 billion in 2014. The government approved 100 smart city projects in August this year. Demand continues to be high in the face of supply for real estate across the country. In fact, along with equities, investments in the real estate sector have provided the highest returns reaching 20% over the last two decades.

Real estate will continue to appreciate as long as India’s human capital continues to expand and the GDP growth rate stays positive.

real estate investment

Is the Real Estate Market a Cause for Concern?

If you think that you should not now invest in residential property because markets have yet to correct themselves or that builders have been sitting on a large pile of unsold inventory and that the weak global economy restricts FDI flows into employment generating sectors then you could be in for an indefinitely long wait.

The soon to be implemented Real Estate Regulation and Development Bill 2015 is further expected to lift consumer and market sentiment.

It is true that the real estate sector has been hampered by fraud and red tape but proper care and precaution while making the purchase can ensure that you do not miss out on the opportunity to partake of the unparalleled returns.

real estate fund in India

Real Estate Investment Tips

·         The past record of a developer and the number of completed projects on time is a good indicator of whether a developer can be trusted or not.

·         That the location of the property in question drives prices is one of the most sound real estate investment tips you’re likely to hear.

·         As land acquisition continues to be controversial, real estate funds in India are a great alternative to owning a property. A Private Equity Fund works just like a Mutual Fund by letting experts handle the veracity and credentials of an under construction project. You also get the benefit of certain returns without taking the risk involved in a single project.

·         The capital involved in a real estate fund in India is also less than that in buying a property.

·         Investing in real estate should be looked at from a long term perspective. Hold on to your property for say 10 years and you will notice the power of compounding growth rates that give spectacular returns.

Property rates in favored locations in New Delhi and Mumbai are one of the highest in the world. Remember that real estate funds in India provide returns higher than gold or silver and are less volatile than equity. Economic growth in India is expected to continue and consumerism set to rise. It is best to buy before the market reaches its peak as by then you cannot hope to earn any higher returns on your investment.