How to Invest in Real Estate and Achieve Best Returns?

We’ve got a strong hunch you know what Investing is, but we’ll say it anyway. Investing is simply putting your money to work for you while you sleep. No, not entirely. Investing is riskier than saving, but it pays off handsomely.

We’re developing extensive portfolios of securities, gold, equity, and government schemes as more of us become aware of the benefits of investing in a good stock.

However, we often forget the one investment that has provided consistent returns for decades: real estate.

The anxiety of investing in real estate, likely since returns in real estate is slower than in other investments. Due to the soaring real estate prices, there is also the misconception that you need a lot of start-up money to even consider investing in real estate.

This could not be further from the truth

The past few decades have indicated that real estate is a reliable investment—even more consistent than a savings bank account and that it can withstand even the most devastating recessions.

So, Why Is Real Estate So Profitable, And Why Should We All Be Involved In Investing In It?

From 2015 to 2020, the value of the real estate in India increased by 10%, while housing loan interest rates are expected to fall in the coming decade.

But enough with the numbers! Simply put, the value of a property is steadily increasing while the cost of purchasing it is decreasing. Furthermore, due to the scarcity of land in high-rise cities, owning even a small flat can be very profitable, whether you rent it or resell it. Are you ready to take the plunge?

Here is the ultimate beginner’s guide to investing in Indian real estate.

Considerations before Investing in Real Estate

It’s all too tempting to be enticed by the prospect of fast gains into investing your hard-earned money in real estate that doesn’t pay off. Whether you’re a beginner or a seasoned pro in this area, there are a few things to keep in mind to avoid making the above rookie mistake.

1. Budget

Establish a budget before you start looking. Stay within the loan repayment ability to avoid jeopardizing your basic needs.

2. Location

When it comes to deciding resale value, location is crucial, so think of a long-term plan. Consider the proximity of facilities such as transportation, schools, hospitals, and shopping centers while making residential investments. The closer the amenities the higher the rent or resale value. Proximity to airports, ports, factories, and other industrial facilities is a valuable amenity for commercial real estate investors.

3. Determine the Purpose

Before you invest in real estate, you should understand why you’re doing so. This may include renting the space, living in it, or simply investing for resale. A clear purpose will assist you in calculating both long-term and short-term investments, as well as returns.

4. Always Choose Properties That Are Registered With The Government

Examine the housing project’s registration with the Real Estate Regulatory Authority (RERA). Check the RERA number and approvals on the internet or with local government officials. Being relatively less expensive housing option, it is a major benefit.

5. Compare Before Zeroing In

Compare monthly maintenance costs, as well as amenities such as security, electricity, and water costs, before deciding on a house. Compare market prices for other fully prepared or under-construction projects, as well as the developer’s marketability. This is critical for determining future investments and property valuation.

6. Inquire About Bank Rates & Loan Benefits

Before taking the plunge, look into the various government programs that are currently in effect. The Pradhan Mantri Awas Yojana (PMAY) is the largest scheme currently in place.

It is available at all major Indian banks and comes with numerous benefits such as low-interest rates and tax exemptions on everything from principal payments to interest payments, registration, and even stamp duty. Obtaining a transferable loan will also be advantageous, as you will be able to transfer it to banks with lower interest rates.

Determining the Cost of Purchase

Consider how much you can set aside per month for EMI repayment, the Credit score (above 700) as well as how much you can contribute in one lump sum during the initial payment. Don’t get lured into Projects that are beyond your monthly EMI repayment capacity.

As a general rule, don’t skim through the regulatory costs, which can add 10% to your bill. Stamp Fee (6%), Licensing (0.5%), Brokerage (0.5%), Advocate Fees (0.1%), Home Loan Processing Costs (0.1%), Tax Deducted At Source (TDS-1%), and Association Administration Charges are among the other fees (1 percent ).It is good to take a home loan eligibility letter from various banks of interest before zeroing in on your property.

Buy a Profitable Property

So, you’ve calculated the cost and selected a few properties that you like. What’s the next step?

The most important objective should be to purchase a profitable property. When comparing properties, it’s important to keep two things in mind- the scope of the project, and its current valuation. These are some of the most important points to consider when thinking to invest in real estate.

1. Scope of the Project

Apart from the proximity to facilities that we previously mentioned, you should also consider the distribution of occupied and open land in the region. The more open ground there is the better.

2. Current Valuation

The right property will help you earn money. Ensure that the property’s rental yield is at least 3-5 percent. Divide the amount of projected rent per year by the total amount you will pay for the property to determine the rental yield.

While both pre-owned and new construction real estate are excellent investment opportunities, there are a few things to know when making these decisions.

For Pre Owned Houses

Find out how long the property has been on the market for resale. The reasons could vary from an overpriced quote to poor fengshui.

Houses that have been used more than twice should be avoided. It’s a major plus if the land is being sold by the original owners.

Keep in mind the distance between your office and the estate. Before deciding, go to the venue at least three times. Be sure to return at night and on weekends to evaluate the location’s security and social importance.

When it comes to new or under construction real estate, here are some things to bear in mind.

Amount of the Reservation: the purchase of new, under construction property begins with the inspection of the vacant land and the approved plan. The buyer pays the builder a booking fee to start the buying process. Before making a purchase, make sure to inquire about the refund policy.

First Deposit: If you’re taking out a home loan, you’ll need to pay your first deposit (which will be your self-contribution) as soon as possible after making your reservation. The loan disbursement process is initiated just after this. Always keep your own legal counsel up to date on these fees.

Timeline for completion: Be sure to inquire about the project’s deadlines (and milestones) with the contractor. Inquire about the builder’s compensation plan in the event of delays.

Withdrawal Clause: There might be a circumstance where you want to leave the contract in the middle. The withdrawal clause comes in handy in this situation. Discuss with your builder about refunds and damages you may face in such situations beforehand.

Warranty: In most cases, newly built housing comes with a ten-year warranty against structural damages. For generic damages, there is a two-year warranty. Be sure to inquire about it with your real estate agent or builder.

We accept that real estate in the heart of the city can be expensive and out of reach. Here are several strategies for lowering the real estate investment prices:

1. Properties On The Outskirts

Investing in outer city areas is cheaper & a good investment in the longer run, like those areas, eventually  become the next city center in as little as 3-5 years

2. Bookings at Launch

Keep an eye on reputable real estate developers and their latest project launches. During the launch, bookers typically offer a discount of 20-30%.

3. Buy Small

Higher resale value, Easier liquidation, a larger buyer pool, and less capital invested in a single property are just a few advantages of investing in several smaller properties, making them a safer option than investing in a single large one.

Not too keen on Buying Real Estate Yet?

How to Invest in Real Estate Anyway

1. REITs, or real estate investment trusts, are businesses that own or fund revenue real estate in a variety of markets. There is currently only one REIT in India: Embassy REIT.
2. Real Estate Mutual Funds: These funds primarily invest in the real estate sector around the world, with the Aditya Birla Sun Life Fund being an example. It could prove to be one of the best bets if you really want to invest in real estate.
3. Real estate company shares are traded on the stock exchange. To find a business to invest indirectly, look through the list of BSE Realty Index constituents.

Thus, this is how you can invest in real estate and get better returns.

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