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Investing in real estate is one of the most attractive ways to secure your financial future. One of India’s fastest-growing industries over the past few years has been the real estate industry. Union Budget 2023–24 allocates a massive Rs. 79,000 crores which is a rise of 66% from the previous year. This will also enhance housing demand and improve infrastructure in Tier 2 and Tier 3 cities
Due to the depreciation of the Indian rupee India’s real estate industry has been experiencing a dynamic transformation, rupee with 11% drop in its value against the US dollar, has created a lot of opportunities for the Indian real estate market,
What’s driving this surge in demand?
The answer is better returns on investment also possibility for secondary revenue and a hassle-free investment process for potential capital appreciation are the main reasons behind the surge in demand.
Digitalization especially Post Covid-19 has helped everyone including NRIs to conveniently explore, evaluate, and invest in properties from the comfort of their homes.
Technology and Real Estate
Earlier, if Indian citizens or NRI wanted to purchase a plot or property in India, they would have to typically rely on a relative or the intelligence of brokers who were mostly driven by personal motives. Also, the process of documentation i.e. Power of attorney, paperwork, etc. was not a cakewalk to even start with.
But due to technology, one might want to avail the information on the best projects to invest in, with a clear understanding of pros and cons, city-specific patterns of capital appreciation and developing areas, can now be found at your fingertips The entire process is seamless and hassle-free.
Is rental real estate still the dependable asset class in India?
There is a plethora of options like equity, FDs gold, mutual funds, etc. available for investment yet real estate investment remains one of the most preferred options. NRIs who prefer to spend their after-retirement time in India also invest in real estate.
The covid-19 pandemic increased demand for short-term rentals like holiday homes and serviced apartments. Therefore, short-term rentals are in more demand.
As the Indian markets have returned to normalcy and with rent relief programs, eviction moratoria and several measures that the Indian government has implemented to protect tenants and landlords have only increased the demand for rental properties.
Millennials mostly depend on rental housing and also increasing level of urbanization results in a consistent demand for housing and rental properties
It is important to note that not only rental market in India is highly regulated, but the rental yield in India is relatively high, making it an appealing option for investors seeking a consistent source of passive income also it is a tangible asset with the potential to increase in value over time.
How to invest in real estate investing with less money?
They say we require money to make money, real estate investing is such an asset class that fits the adage. Besides the right place at the right time; the right people on your side matter to invest in real estate.
Only a handful are flooded with money to embark on a real estate adventure. Here are some real estate investing strategies for those with less money.
Partnerships
For those who believe in owning actual physical real estate rather than just REIT shares, the partnership method enables groups of investors to purchase one or more apartments or condos for some percentage of the monthly rent.
Microloans
an excellent way to invest in real estate when you have no money is by taking a microloan from some traditional financial institution.
Property lease
Property lease option one is the most underutilized investment with a low initial cost is Property lease options. If you have a property lease option, you can rent out a property without purchasing but by paying a small upfront investment and by do this benefits of a steady rental income
without the hassle of a mortgage can be availed.
Seller Financing
This is a solid method of investing in real estate when there is not enough money to venture out. When you can obtain a loan from a financial institution, a seller of the asset can take on the role of lender allowing the buyer to purchase the property. This is an excellent way to acquire real estate.
How to invest in REITs?
A real estate investment trust (REIT) is a company that manages portfolios of high-value real estate properties and mortgages. They also give similar returns to an entire asset. REITs are great opportunities for investing money If you don’t have enough money to buy an entire asset, owns and operate real estate to generate income. The income collected by the company is distributed among shareholders as income and dividends.
Simply put, Real estate investment trusts (REITs) are like mutual funds, but with a portfolio concentrating on commercial real estate assets. REITs are not permitted on residential property in India.
The three listed office-backed REITs in India are
Embassy Office Parks REIT
Mindspace Business Parks REIT
Brookfield India Real Estate Trust
REITs in India have outperformed their global peers by 13.4 percent since April 2019.
Quality Grade-A retail assets which are typically single-owner/ institutionally owned have numerous advantages to investing in REITs.
For anyone already familiar with investing in products such as stocks REITs are convenient but this doesn’t imply that you own property which means you don’t have to worry about property management or maintenance.
Finally, REITs provide very competitive returns when compared to other investments such as equity.
Almost all REITs are concentrated in selected regions, lack of transparency, low liquidity valuation, and tax inefficiency are the main downside of REITs.
Things to note down
Here are some checkpoints for investors who are looking to invest in real estate sectors post-Budget 2023.
- Long-term view
One needs to have a long-term view when investing and as per the asset diversification principle, no more than 25% of your savings should be invested in real estate.
- REITs
The commercial space you invest in should not be sold to many investors as it makes managing the operations of the building difficult. Look out for REITs if you have cash constraints
1. Sustainability Investing
Look for ESG-compliant buildings as the world is now moving hard on sustainability and we see higher value returns much sooner.
2. Location
It is important to invest in a location that has an influx of new businesses or planned infrastructure development that will have more scope for the potential for appreciation
3. Research
Thorough research of the property before investing is mandatory.
The research should include
- Clear title and hire a legal expert to establish a clear title.
- The condition of the property,
- The demand for rental properties
- Potential for appreciation.
Part of the research process is also seeking expert advice like brokers can provide valuable insights.
Financing
If you are using any financing have a clear understanding of the terms and conditions. Before making any large purchases consult your financial advisor.
Types of Rental Properties
Residential Real Estate
Residential rental properties are the most popular the demand for housing is always high and it is only going up with the increased urbanization., and a growing population.
Commercial Real Estate
The sector has reformed to sort out early issues and made it lucrative for developers and also for foreign direct investment (FDI). Commercial Real Estate is expected to grow a whopping 21.20% in the coming years.
Commercial or Residential: Which one to bet on?
There be it Commercial or Residential Real estate investors must consider all crucial points like financing, connectivity, maintenance, and all other market circumstances.
Direct commercial real estate vs REITs
For both investments analyze the market dynamics, and study the market trend, performance, and returns in comparison with your financial situation and investment goals. Never neglect to take professional advice before investing.
Note to the NRIs
Given the global economic sentiments which have made the rupee weaker and market volatility; way ahead of gold, stocks, mutual funds, saving accounts, and bonds, real estate has also emerged as the safest bet for anyone including NRIs.
To diversify their portfolio approximately 52% of NRIs consider investing in real estate in the Indian. NRIs are also considering investing in tier 1 and tier 2 cities.
Why you should invest in real estate?
Post pandemic most important factors that pushed many Indians to invest in real estate are
- Work-from-home
- Good prices for the Long-term commitment
- Rising Interest Rates
- Government Incentives like Low home loan rates and other Subsidy Scheme deductions on stamp duty and exemptions on the sale of a property
India’s real estate sector was projected to be valued at the $200 billion market by 2021 and by 2030 is likely to hit the $1 trillion mark,13 percent of India’s GDP.
In conclusion is it the right time to invest in real estate?
Covid-19 was a testing time for everybody, having an investor psyche can help you make money shortly. If you are yet invested in real estate, this is the perfect time to start thinking about the right property and doing some smart research so that you can get your dream property at an affordable price. The demand for any real estate asset by both domestic and international investors has crossed pre-pandemic levels. In an ever-growing globalized world, the Indian real estate sector is witnessing a radical shift. For any potential homebuyer who is still pondering, there is no time like the present to invest in their dream dreams.
