Whenever we thought about investing, the first thing that comes into our mind is real estate. Real estate means property investment. And in India, there is a huge demand for real estate investment because our population is increasing day by day. One more fact about this investment is that you can get the lowest risk and the highest profit. In this article, we will do a detailed discussion about real estate investing. Such as how to invest in real estate in India? what is real estate investment? and how to do property investment in India? In this article, you will get the answer to all these questions. Investment in real estate in India is an investment where you get higher interest at low risk.
How to Invest in Real Estate in India
You can consider the following tips to do investing in real estate in India. To know more about investment options in India other than how to invest in real estate click here.
Use Dept
Middle-class people like us do not have enough money to do investment in real estate in India. But in this case, we do not have to use our own money. We can take a loan from the bank and the bank will give you a loan on the basis of your existing house. To know more about the government loan scheme click here. Some people will think that it is risky to keep our house as collateral security. But it is not that risky. So let us understand how. The value of your house is 30-40 lakh. The bank will easily give you a loan of Rs 20-25 lakh including your margin. But you do not have to take that much amount of money. You can only take a loan up to 5-6 lakh with an interest of 10-12%. Because you have to hold the property for some time.
Collaboration and Partnership
The partnership comes in our mind only during business not during investment, which is wrong. Because by doing partnership in the investment you can increase many investment options for you. Suppose you have to do property investment in India but you didn’t have enough budget to buy that property. So in this case you can add partners to do property investment in India. So that you can cover the remaining amount. Try to convince them by showing the potential of that property. But also tell them that they have to invest at their own risk. So in this way you can increase your investment potential. To know about long-term investment plans other than property investment in India click here.
Ugliest Property in Best Area
Normally, if we want to do property investment in India, we see how beautiful the property is. But as an investor, we do not have to see such things. You have to search for the best area which is developed and has high property rates. In that area, you have to find the ugliest property. Because you will get that property at a very low price. And by investing your little amount you can sell that property at a higher price. Because that area is developed and expensive,
Advantages and Disadvantages in Real Estate Investing
Before investing in real estate in India you should know the advantages and disadvantages of real estate investment. These following points will help you to do a better evaluation and understanding of property investment in India.
Advantages of Real Estate Investing
Capital Appreciation
It is a very simple thing. If you are investing in real estate you had only one thought. That, now I am buying this property at less rate, then in the future, I can sell this property at higher rates. So this is basically known as capital appreciation. That how much your capital becomes appreciated over a time period. This is the most prominent reason why people are investing in real estate in India.
Positive Cash Flow
The cash flow is just that your net cash coming out from the system in your pocket is known as positive cash flow. However, in real estate cash flow is calculated by your monitoring rental, subtracting by your monthly mortgage and operational cost is known as cash flow. Therefore, our main focus should remain on the positive cash flow in real estate investing.
Depreciation Cost
You know that we show in our account that the value of the building on our land is depreciated over a period of time. Now if we put that depreciated cost in our account. Then our annual income will be subtracted by that. Due to that, we get benefits on tax. So, this will be beneficial for you till you have your property investment in India. This is the Real estate investing major advantage.
Tax Benefits
As I told you that depreciation cost gets subtract from our income. In the same way, the interest we are paying will also count as our expense. So the interest you are paying to the bank as the mortgage will be shown in our balance sheet as an expense. So due to that, you will again get tax benefits over a period of time. This is also one of the major advantages of doing real estate investment in India,
Portfolio Diversification
Now, the good thing about real estate is that it is stable. Therefore, the prices of real estate have less fluctuation until and unless you have invested in the very wrong property. Due to this, it has a lower risk. And secondly, the returns are also very high.
Leverage
If you want to invest in real estate and the price of the property is 50 lakh. It is not compulsory to give the full payment of that property. You can also give an upfront amount of 10 % that is 10 lakh. And you can take a loan for the remaining amount. That means if you also have 50 lakh, you can buy the property for 10 lakh. And you can invest the remaining 40 lakh in different ways. So due to this, you get to leverage that you can invest in more than one property.
Disadvantages of Real Estate Investing
Illiquidity
Some people buy the property easily. But after buying they find it difficult to sell that property. It also takes 4-5 years to sell their property. So in the real estate market, there is so much illiquidity. The reason behind it is, that the value of an asset is too much that the buyer does not show interest in it. Till the demand does not increase in the market it will be difficult to get liquidity. So as the asset value of the property gets higher and the buyer comparatively decreases.
Management of Asset
If you buy a house and then you thought to rent out the house. There are many challenges you have to face. Such as the tenants are managing the house or not, is the condition of the house is good or bad, and many more. So you have to involved directly whenever you give your house on rent. Therefore, there is a bit of an issue in the management of the house. So it is difficult to scalable. So this is the major issue in real estate investing.
Points to Consider Before Buying Property
While no one can predict the JP and Amrapali like situation. But the buyer can definitely avoid getting in such a situation by keeping these points in mind. Consider the following points while doing real estate investment in India.
Inspect the Track Record of the Developer
Check whether developers met the timeline for completion promise for previous projects by visiting their completed and operational project sites. Now, since RERA has come into force. A lot of information relating to the registration project can be downloaded from the respected state real estate authority’s website. Therefore, all the developers have to compulsory register their ongoing projects and new projects with the respective state RERA authority.
Check Timeline for Completion of the Project
Check the timeline for the completion of the project provided at the time of application, on the webpage of the respective state RERA website. If the project you are opting for, is proposed to be developed in phases, it is recommended that you confirm the phase with the completion timeline. As promised by the developer on its webpage. Also, check if the real estate agent or broker is register under RERA or not.
Check the Sanctioned Building Plan and Verify Project Title
The title of the project land has to be transparent and sellable. You should verify sanctioned layout plans, environmental clearance, and further approvals with respect to the project as uploaded on the state RERA website and their validity period. Confirm whether the constructor is a landowner or is a constructor. In case the constructor is not the landowner. Then the documents by which the constructor gets the right and entitlement to develop, sell, and collect money from the landowner is to be verified. Check the facilities to develop in the various phrases of the prospect, on the webpage of the RERA website.
Review the Builder-Buyer Agreement
It needs to be checked that the draft agreement given to the seller by the developer is linked with the draft of the agreement prescribed under the RERA rule. The developer can not make any addition, amendment, or variation in the draft of the agreement to sell to the seller.
Review Inclusion and Exclusion in the Property Prices
RERA requires that the property should be linked to the carpet area. Check the inclusion and exclusion in the purchase price. Most of the state RERA rules also provide for the breakup price of the property into the amount, cost of the apartment, preferential location charges, etc. There should not be any hidden charges. The purchase price should be escalation free.
Choose your Payment Plan Properly
There are various kinds of payment plans that developers offer to the buyer. Such as down payment plan, flexible payment plan, time-linked payment plan, etc. Calculate the total price under-subscribed plan. Do not get deceived by fleshy payment schemes which are not beneficial for you. Keep this in mind while doing real estate investment in India.
FAQ regarding Real Estate Investing
Generally, it takes 10-12 weeks to found and select the property. After you selected the property it usually takes 30-45 days for paper works and buying the property.
Generally, it requires a 620 or higher credit scores to buy the property. Due to which borrow becomes risk-free.
The national average down payment is 11% of the property rates. And it is varied for the new buyers as per the government.
Yes, you should do the home inspection to see the condition of the property and the defects of the property.
Editor’s Note | Real Estate Investing
As we know that the whole world is affected by the COVID-19 pandemic. So let’s talk about the effect of COVID-19 on the real estate market in India. The COVID outbreak has severely affected the real estate sector of India. It is a labor-intensive industry and affects 269 other industries along with it. The incomplete projects will take a long to start, due to labor moving to their villages. And in this case, the property sale will also affect adversely. And additionally, the liquidity also gets in more tightness.
