Key Takeaways:
Investing in real estate, including land or buildings, can provide the potential for long-term wealth appreciation. This tangible investment option can even offer a steady rental income with various tax benefits.
However, real estate investing in India requires specific knowledge of market dynamics and actionable strategies. Knowing how to invest in real estate in India, especially when it comes to choosing between residential vs commercial property, can help with REITs and smart investment planning. Read more to learn about different types of real estate investments and how to make informed decisions.
These properties include the ones designed for the purpose of living, such as houses, apartments, villas, duplexes, etc. When purchasing a real estate property, it is crucial to consider the following:
Investing in residential real estate has long been considered a reliable path to wealth and financial security. Check out the benefits below:
Throughout history, real estate investment has witnessed appreciation in property values in the long run, making it an attractive investment option.
You can generate a reliable source of income through residential properties by renting them out to tenants. This can help you cover the costs related to the upkeep of the property.
Under Section 24 of the Income Tax Act, you can claim a flat standard deduction of 30% on the gross value of the let-out property. You can also claim deductions up to a certain limit if you have taken a home loan for the acquisition, construction or repair of a property.
While investing in residential real estate can offer significant rewards, it's not without its challenges. These are some of the disadvantages of real estate investing in India:
Unlike other investment avenues, real estate investing requires significant upfront capital. Moreover, there are also high ongoing expenses associated with the maintenance of the property.
The value of residential properties depends on various economic factors, including interest rates, consumer confidence, and employment levels. During a financial crisis, the value of a property can drop significantly, impacting your real estate returns.
When compared to other investment options like stocks and bonds, real estate offers the least amount of liquidity. This is because finding a potential buyer, negotiating prices and completing the legal process can be time-consuming.
Residential properties with higher values, where the buyer owns the land on which the unit is built, tend to offer lower rental yields. In contrast, apartments and builder floors, where the buyer owns a share of the undivided land and the properties are generally more affordable, typically provide higher rental yields.
These include properties that are used for business purposes, such as offices, retail stores, shopping malls, and hotels. The key considerations one needs to make when purchasing these properties include:
Here are the types of commercial properties you can invest in:
A Real Estate Investment Trust (REIT) is an entity that invests in income-producing real estate properties. Through REITs investment in India you can opt for large-scale real estate ventures without directly owning physical property. Like mutual funds, they pool capital from numerous investors to invest in large-scale real estate.
REITs invest in a wide range of properties, including:
The following are some of the benefits of investing in REITs in India:
Read more about the rewards and risks that come with leverage in real estate.
Real estate investing in India requires careful planning to simplify your search for the right property and make an informed decision. Here are the factors that you need to consider:
Get an estimate of the total capital you need for the purchase price, stamp duty as well as registration charges. Create a budget and save consistently for it. If needed, you can also get a loan to ensure that you have access to the required funds.
Define whether you are looking for short-term profits or long-term wealth generation. Zero in on the property you wish to purchase based on this strategy.
Browse online real estate platforms to find comprehensive property listings and stay updated on market trends. Additionally, collaborate with real estate consultants to gain access to exclusive listings and benefit from expert negotiation services.
Perform detailed property inspections to identify any hidden issues that may impact its value. Moreover, review zoning regulations and property taxes to understand potential use restrictions and ongoing expenses.
Evaluate comparable properties to establish a reasonable offer, taking into account the condition and location of the properties. Negotiate both the price and terms, staying flexible and clear in your communication.
The main types of real estate investment in India include:
REITs provide diversification through investment across different geographies and tenants. They also offer higher liquidity but come with limited control. On the other hand, direct property ownership provides greater control with potentially higher returns.
When comparing residential vs commercial property, you will find the latter is more profitable. Commercial real estate comes with higher costs and risks, but the returns are higher because of higher rents and longer lease terms.
The following are some of the risk considerations you need to make when investing in real estate:
You can diversify your real estate portfolio by employing various strategies, such as investing in different property types and locations. Additionally, you can explore investment vehicles like REITs and crowdfunding platforms to broaden your options further.
