A Guide to Investments in Indian Real Estate

Real estate has traditionally been the best investment option as a whole and an investment opportunity for individuals with high net worth. Financial institutions, as well as people looking for viable options to invest their money in properties, stocks, bullion and various other avenues.

The money you invest in real estate for its income and capital growth will provide steady and predictable income returns comparable to bonds, which offer a steady yield on investment, especially if the properties are rented, as well an opportunity for capital appreciation. As with all investment options the real estate market comes with a risk associated with it, and is different from other investments. The available investment opportunities can be classified broadly into commercial retail and office spaces.

Investment scenario in real estate

If you are considering investing in real estate investments should consider the risks involved. This investment option demands the highest price for entry and is plagued by a lack of liquidity, and a shaky time frame for gestation. In order to be illiquid you are unable to sell certain parts of the property (as you might had done with selling some units of equity, debts as well as mutual funds) in the case of an immediate need for money.

The maturity period of properties is uncertain. Investors should also verify whether the title is clear especially when investing in India. Experts in the field in this regard claim that property investment should be undertaken by those who have a greater financial capacity and more long-term vision of their investments. Visit:- https://bdsreview.com/

From a financial-returns-over-time viewpoint, it’s advisable to invest in commercial properties.

The returns from property market are comparable to some index funds and equities over the long term. Anyone looking to balance their portfolios can look at the real estate sector as a safe method of investment with a certain level of risk and volatility. The right tenant, the geographical location, segmental categories of segments of Indian property market, as well as individual risk preferences will hence forth determine the main factors for achieving the intended yields from investment.

The proposed introduction of REMF (Real Estate Mutual Funds) and REIT (Real Estate Investment Trust) can boost the value of real estate investments from a small-scale investor’s perspective. This will also enable small investors to get into the market for real estate with a the minimum investment of INR 10,000.

It is also the desire and a need from various market players in the property sector to relax some norms for FDI in this sector. These foreign investments would then bring higher standards of quality infrastructure and hence would change the entire market scenario in terms of professionalism and competition of market players.

In the end, real estate is anticipated to be a good investment alternative for bonds and stocks over the next decade. This attractiveness of real estate investment would be enhanced by the combination of the favorable inflation rate and low interest rates.

Looking ahead, it’s possible that as we move towards opening of the real estate mutual fund sector and the involvement of financial institutions to the real estate investment, it will pave the way for more organized investment real estate transactions in India that would be an ideal way that investors could get an alternative to invest in property portfolios with a minimal scale.

Investor’s Profile

The two active investor segment are the The High Net Worth Individuals (HNIs) and Financial Institutions. Although institutions usually show a preference to commercial investments, the higher net worth individuals are interested in investing in residential and commercial properties.

In addition, there is the third one non-resident Indians (NRIs). There is a distinct bias toward investing in residential properties than commercial properties by the NRIs, the fact could be reasoned as emotional attachment and a future sense of security desired by NRIs. The documents and formalities for buying immovable properties other than agricultural and plantation property are quite simple and the rental income is free to repatriate outside India, NRIs have increased their roles as investors in real estate.

Foreign direct investment (FDIs) in real estate constitute a minor proportion of all investments because there are limitations such as a minimum lock in duration of three years. Also, there is a minimal size of property to be constructed and a conditional exit. In addition to the restrictions that the foreign investor must meet, they must deal with numerous departmental government offices and interpret intricate laws and regulations.

The concept of Real Estate Investment Trust (REIT) is in the process of becoming a reality in India. However, like many other new financial instruments, there are going to be challenges in order for this concept to be accepted.

Real Estate Investment Trust (REIT) is a business that is devoted to owning and, typically operating income-producing real estate, such as apartments, shopping centres as well as warehouses, offices, and offices. A REIT is a company that purchases, develops, is able to manage and market real estate, and allows participants to put money into a professionally managed inventory of real estate.

Certain REITs are also engaged in financing real estate. REITs are pass-through entities or businesses that can transfer the bulk of income cash flows to investors without taxation, even at company level. The principal purpose of REITs is to transfer the profits to the investors in as intact manner as they can. So, initially, the REIT’s operations would normally be restricted to generation of property rental income.

The role of the investor is vital in instances in which the interests of the seller and the buyer do not match. For instance, if the seller is eager to sell their property and the tenant is planning to let the building, between them, the arrangement will never be fructified but an investor can have competitive yields by buying the property and leasing it out to the occupier.


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