The value of real estate investment - opportunities and insights

“Landlords grow rich in their sleep.”

While buying a precious home to live in is a dream for every family, buying a home as an investment is a different dream for many. Investing in real estate is considered one of the most popular long-term wealth building solutions. It generates rental income and profits via property appreciation, delivering excellent capital gains. It helps investors boost their income and diversify their investment portfolio. Residential investments include homes, condominiums, row houses, townhouses, etc., while commercial real estate includes ownership of retail stores, offices, storage facilities or even warehouses.

Let's look at the top 3 reasons to consider a real estate investment:

1. Capital appreciation

   Since property value increases over time, investors can expect capital gains with their realty investment. It's the profit one gets from the difference in the purchase and sale prices. While investors can realise their capital gains only after they sell the property, it still adds to their net worth. Also, in the last few decades, real estate prices have risen dramatically due to the high demand for housing. In the top eight cities in India, housing prices rose by 7% YoY, owing to persistent demand and steady borrowing rates.

2. Rental income

   Real estate is expected to grow at 9.2% CAGR from 2023 to 2028 - thanks to factors such as urbanisation, expansion of rental market, and appreciating prices. Real estate investment provides steady cash flow. This can be a great investment option for investors who seek a consistent monthly income – for instance, retirees and those looking for an alternative source of income. Also, income from real estate investment serves as a buffer against stock market fluctuations.

3. Sense of security

   Unlike stocks or bonds, real estate is a physical asset that offers a feeling of stability, especially in volatile financial markets. Investors feel complete peace of mind knowing their investment is physical and enduring, less susceptible to fluctuations that plague other investment types. In times of economic uncertainty, a real estate investment can feel more secure – providing immediate and long-term financial benefits.

Different ways to invest in real estate

The simplest method of real estate investment is to purchase a flat or apartment and put it onin on rent. This requires a significant initial investment and also involves certain maintenance costs on an annual basis. For investors who want to start small, consider renting out a portion of an existing property – but make sure to include all terms and conditions in the rental agreement.

Fix-and-flip is another popular investing mode that's often seen among those who have general contracting experience. The ownership of the asset is relatively short-term, but this kind of investment does generate good returns.

Investors can also choose Exchange-Traded Funds (ETFs) and mutual funds in real estate stocks or Real Estate Investment Trusts (REITs) for high liquidity and low costs. After the success of REITs in India, investors are also considering fractional ownership – wherein they can park their money in realty while reducing the investment costs.

5 top factors to consider before investing in real estate:

• Type of property

  Investors should start with the kind of property that best suits their goals – residential, industrial, commercial, retail, etc.

• Location

  Location is key in real estate. Is the location of the property easily accessible? Does it have scope for growth in the future? Properties that are road-touch tend to appreciate at a better rate. Also, it is important to be mindful of a property's age and condition.

• Finances

  Since real estate investment requires a hefty amount, it's important to check if investors have the funds readily available in savings or if they can apply for a loan. Banks prefer investors with a good credit score, steady income and a trusted repayment history.

• Legalities

  Before investing, it's essential to check if the property seller has all the property documents in order. This protects the investor's interest and also helps establish ownership. Also, loan applications are approved only if the property deeds are verified, so this is a crucial step in investing.

• Market conditions

  Real estate affects the stock market and vice versa. Investors must be able to gauge when is the right time to invest in real estate and, similarly, when is the right time to sell.

  Investing in real estate in India is a lucrative opportunity. However, it requires careful consideration. When investors do their research, understand the market and legal framework, and make informed decisions, they will definitely reap high returns. Real estate investments provide stability and diversification, especially for investors who who want to invest for the long term.