How to Invest in Real Estate in India

Buying real Estate instead of stocks and bonds can be a much better investment. Unlike bond or stock purchases, a potential real estate buyer can leverage their purchase and pay only a portion of the total cost upfront, with the remainder paid in EMIs.

Furthermore, owners can rent their space for additional income or live in it without worrying about monthly rent payments. Alternatively, owners can sell their properties for a higher price during a seller’s market.

The best thing about investing in real estate is that there is no one-size-fits-all approach. There are numerous ways to invest in real estate.

Importance of Real Estate

For centuries, kingdoms have fought battles over land, leaving no stone unturned in pursuing that valuable asset. While domains no longer exist, the demand for land has remained constant, with everyone vying for a piece of the pie. Because prime real estate never loses its market or value, investing in it can be a wise decision, with returns far exceeding traditional investment options.

Everyone’s dream is to own a home, and realising that dream can provide you with emotional and financial fulfilment. Due to the scarcity of land in many cities across the country, even a tiny flat can give you a profit, either through rental income or through property sale.

How to Invest in Real Estate

Purchasing a property is the most common way to invest in real estate in India. The following points should be kept in mind while doing so:

1. Estimate Affordability

The first step is to determine your investment appetite. The purchase budget will have to be determined based on income and savings. The property’s price and the statutory charges associated with property acquisition, such as stamp duty, registration fee, brokerage, and so on, must be considered.

2. Apply For Home Loan

Make sure your credit score is acceptable before applying for a home loan. This can be verified through CIBIL’s online portal. Banks will examine a borrower’s EMI paying capacity in addition to their credit score by scrutinizing documents such as a statement of assets, bank statements, income tax returns, and salary slips.

3. Choose Property

It’s essential to consider the flat’s location, amenities, and size when deciding which property to buy. A healthy development will strike a balance between open spaces and densely populated areas. Check that the rental yield in the area is sustainable if the property is to be used as a rental. Closer properties to popular office spaces and commercial hubs are preferable. They should be easily accessible by public transportation and have schools and hospitals nearby. Other considerations include whether the home has previously been owned or whether you are the first owner. Pre-installed woodwork, fixtures, and broadband will be included in previously lived-in homes.

Although many of these amenities, such as modular kitchens, video phones for main doors, and air conditioning, are included in many newer developments by reputable developers. The property’s open floor plan should be well-organized, with plenty of space between hallways and rooms. It is critical to have a designated parking space if you own a vehicle. The complex’s security should also be adequate.

4. Reputation of Builder

Before buying a house, make sure the builder is a reputable name who can be trusted to complete the project within the agreed-upon time frame. A good developer completes projects on time, adheres to municipal guidelines and building plans, constructs with high-quality materials and fixtures, and pays close attention to architectural design.

5. Check Papers

The documents, such as the title deed and registration papers, must be for the property purchase to be valid. It’s a good idea to hire a real estate lawyer to go over these documents and ensure they’re in order. Suppose the property has changed hands several times. In that case, it is even more important to thoroughly check the papers to ensure that no previous transactions on the property have resulted in litigation.

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Other Options for Real Estate Investment

You may want to invest in real estate but lack the financial resources. Don’t give up if this is the case. Other than purchasing property, there are numerous ways to invest in real estate. Here are a few examples:

1. Real Estate Mutual and ETFs

Mutual funds that invest in real estate companies and REITs are known as mutual funds. They provide diversified real estate exposure for relatively small capital investments. Depending on their strategy and goals, real estate mutual funds can provide investors with a much broader asset selection than buying REITs. Real estate mutual funds have a high level of liquidity. Another benefit is the fund’s analytical and research information, which eliminates a lot of your legwork. Investors have the right to hire financial advisors to help them make well-informed investment decisions.

2. Real Estate Investment Groups (REIGs)

Real Estate Investment Groups, or REIGs, are a good option for people who want to own a rental property but don’t want to worry about managing it. It’s a company that either builds or buys a set of apartment buildings and then sells them to investors, similar to mutual funds.

The company becomes a purchasing medium, and the investor becomes a group member. A person can own one or more living spaces in an REIG and not worry about managing or maintaining them.

3. Shares of Real Estate Companies

You can buy real estate company stocks directly in India as an investor. This will necessitate a deeper understanding and research of the company’s performance and portfolios. The S&P BSE Realty Index, a real estate sectoral index, tracks India’s top real estate companies. Investing in the stock market necessitates opening a brokerage account and is extremely risky. Only use this option if you are confident in understanding real estate companies.

4. Rental Properties

Purchasing properties for a rental is another option if you are serious about real estate investing. Rental properties can provide consistent cash flow while also increasing in value over time, but investing in rental properties entails taking on the role of a landlord. This is a time-consuming job because you’ll be responsible for paying EMIs, and property taxes, maintaining the property, finding tenants, and dealing with any issues as a landlord.

A common strategy is to charge enough rent to cover expenses until the mortgage is paid off, at which point the majority of the rent turns into profit. The other primary source of income for landlords is appreciation. If the value of your home rises, you may be able to sell it for a higher price.

5. Real Estate Investment Trusts (REITs)

Real estate investment trusts (REITs) allow you to invest in real estate without purchasing it. They’re public companies that raise money by selling stock and issuing bonds, then buying and leasing real estate assets like shopping malls, office buildings, apartment buildings, and warehouses. They’re often compared to mutual funds. REITs must distribute nearly all of their after-tax profits to their shareholders in dividends. As an investor, all you have to do is sit back and collect rewards. The trust management handles all ownership and rental logistics.

A brokerage account can be used to buy and sell REIT stock on the open market. REITs are a very liquid investment option as a result of this. REITs tend to pay high dividends, making them a popular retirement investment. Investors who do not require or desire regular income can have their dividends automatically reinvested to increase the value of their investment. A REIT differs from a mutual fund only because it invests in real estate rather than bonds or stock options.

Main Point

Real estate investment is profitable and provides predictable returns over time, but it is not without risk. There are numerous options for real estate investment in India. However, you must conduct extensive research before deciding which option is best for you.