Global crisis, soaring inflation and ineffective government policies have pushed investors towards traditional safe and less risky modes of investment such as real estate followed by gold and silver.
Although, real estate is the most illiquid asset, if invested prudently it is also source of steady income flow through rentals. The real estate sector in India has been growing steadily over the past decade and been in the highlight post the 2008-2009 global financial crisis, where India has stood out as a showcase example of financial stability, specifically in terms of its conservative banking sector. Thus, the real estate sector is attracting huge investments in the form of private equity players and NRIs. Now, with 100% FDI in real estate being allowed, overseas developers are also closely looking at this market. However, lack of transparency and tight regulations mean buyers are making investment decisions with limited understanding of the risks involved in parking their hard-earned money in real estate.
Investments into real estate can be broadly made into residential or commercial property. Depending on your resource and objectives one can look into investing in the following options:
Residential Property: Investments into residential property market can be done directly or by investing in a building or estate project along with other investors.
Although, real estate is the most illiquid asset, if invested prudently it is also source of steady income flow through rentals. The real estate sector in India has been growing steadily over the past decade and been in the highlight post the 2008-2009 global financial crisis, where India has stood out as a showcase example of financial stability, specifically in terms of its conservative banking sector. Thus, the real estate sector is attracting huge investments in the form of private equity players and NRIs. Now, with 100% FDI in real estate being allowed, overseas developers are also closely looking at this market. However, lack of transparency and tight regulations mean buyers are making investment decisions with limited understanding of the risks involved in parking their hard-earned money in real estate.
Investments into real estate can be broadly made into residential or commercial property. Depending on your resource and objectives one can look into investing in the following options:
Residential Property: Investments into residential property market can be done directly or by investing in a building or estate project along with other investors.
- Property can be purchased through mortgage at an attractive rate however; there is risk of these rates rising and failure to make the payment then.
- Rentals from residential property are low, typically between 4% and 6% pre-tax and after tax the figures go down even further compared to the range of 8 - 12% of commercial property
- Investing in a property in the pre-launch stage is highly risky. Since such projects are still on the drawing board, their final specifications can change drastically. Another risk is if construction is delayed or the value of the property does not rise fast enough to yield a return that can cover the cost of funds you will end up losing money.
Commercial Property: Investment into commercial property can further be divided into following:
- Buy office space or retail property directly from the developer: It will require investing in huge floor plate for commercial purpose but can expect good rentals as tenants would include major corporations and multinational companies. However, the quality of the commercial property is crucial and hence needs to be properly maintained
- One can also invest into shares of commercial developer from stock market
- Invest in real estate fund focused on commercial real estate.
Invest wisely keeping your objectives the driving factor for investments.
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