A Guide to Investments in Indian Real Estate

Traditionally, real estate has been an a source of substantial investment as well as an investment opportunity for high net-worth individuals, Financial institutions, as well as those looking for alternatives for investing money among stocks, bullion, property as well as other options.

Money invested in property for its capital growth will provide steady and predictable returns on income similar to bonds, which offer a steady yield on investment, especially if the the property is rented as the possibility of capital appreciation. Like all other investment options property investment has its own risks associated with it that are different from other investments. Investment opportunities available to investors can be classified broadly as commercial, residential retail and office spaces.

Investment scenario in real estate

Anyone who is considering real estate investment should take into account the risk involved in it. This investment option demands the highest price for entry, suffers from lack of liquidity and an uncertain time frame for gestation. In order to be illiquid, one cannot sell some pieces of his property (as one might would have sold units of equities, debts as well as mutual funds) in case of urgent need of funds.

The maturity period of property investments is not certain. Investor also has to check whether the title is clear especially when investing in India. Industry experts in this regard claim that property investment should be undertaken by those with a larger budget and a have a longer-term perspective on their investments. Visit:- https://bdsreview.com/

From a long-term financial returns perspective, it’s best to invest in higher-grade commercial properties.

The returns from property market are comparable to specific index funds and stocks in the longer run. Anyone looking to balance his portfolio should take a look at the property sector as a safe method of investing, but with a level of risk and volatility. A right tenant, geographical location, segmental categories of an Indian property market, and personal risk preferences will provide the key factors to achieve the desired yields from investments.

The planned introduction of REMF (Real Estate Mutual Funds) and REIT (Real Estate Investment Trust) will increase the value of the value of real estate investments from a small-scale investor’s standpoint. This will also allow small investors to get into the market for real estate with a an investment as little as INR 10,000.

There is also a desire and need from various market players of the property segment to ease up on certain standards regarding FDI in the property sector. These foreign investments would then bring higher standards of quality infrastructure, and thus alter the entire market scenario in terms of competition and professionalism and professionalism of the players.

Overall, real estate is anticipated to be an attractive investment alternative for bonds and stocks over the next few years. The appeal of investing in real estate would be further enhanced because of favourable inflation and low interest rate regime.

In the near future, it’s possible that , with the advancement towards the opening of the mutual funds for real estate business and the inclusion of financial institutions in the real estate investment that it could pave the way for more structured investment real estate investment in India and could be an apt way for investors to gain an alternative to invest in property portfolios on a marginal scale.

Investor’s Profile

The two active investor segments are high net Worth Individuals (HNIs) and Financial Institutions. While institutions generally tend to favor commercial investments, the higher net worth investors show interest for investing in residences as well as commercial properties.

Apart from these, is the third one non-resident Indians (NRIs). There is a strong bias toward investing in residential properties than commercial properties by the NRIs and this can be explained as emotional attachment and the need for future security by the NRIs. The procedures and documentation required to purchase immovable properties , other than plantation and agricultural properties are quite simple and the rental income is free to repatriate beyond India, NRIs have increased their roles as investors in real estate

Foreign direct investment (FDIs) on real estate form a small portion of the total investments as there are restrictions including the minimum lock-in period of three years, a minimum size of the property that must be constructed and a conditional exit. In addition to the restrictions, the foreign investor will need to negotiate with a number of government departments and interpret numerous complex laws/bylaws.

The concept that is Real Estate Investment Trust (REIT) is in the process of becoming an official concept in India. Like many other innovative financial instruments, there will to be some issues before this new idea can be accepted.

Real Estate Investment Trust (REIT) would be structured as an entity that is dedicated to the ownership of and, typically operating income-producing real estate such as shops, apartments warehouses, offices and other warehouses. The REIT is a company which acquires, develops, is able to manage and market real estate, and allows participants to put money into a professionally managed portfolio of properties.

Certain REITs are also involved in the financing of real estate. REITs are pass-through entities or companies that can share the majority of in cash to investors without taxation, even at levels at the corporation level. The principal purpose of REITs is to pass the dividends to investors in as intact manner as it is possible. Thus, in the beginning, the REIT’s business activities would generally be restricted to generation of income from rental properties.

The role of an investor can be crucial in situations in which the interests in the sellers and buyer do not match. For instance, if a seller wants to sell the property but the tenant is planning to lease the property between them, the agreement cannot be completed; however, an investor may be able to earn profitable yields by purchasing the property and renting it out to the tenant.

 

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