Buying property is a time-tested investment option considered by many Indians. What makes the investment property attractive for Indians is the anticipation that its value would appreciate over time, giving a high return on their investments. Having a property also provides long-term security. That is why when Indians have surplus money, they consider real estate the first option that needs to be explored. Many factors impact real estate prices. For instance, the first Covid-19 pandemic wave had created a lull in the real estate market. However, with the pandemic restrictions being lifted and the economy slowly limping back to normalcy, the real estate market picked pace from the last quarter of 2020, mainly owing to a rise in demand for residential properties.
Government initiatives like the Pradhan Mantri Awas Yojana (PMAY), through which 20 million affordable houses will be built, will help raise demand for the sector. According to NITI Aayog, the real estate sector in India is expected to have a market size of $1 trillion by 2030, accounting for 13% of India’s GDP by 2025. These favorable prospects continue making real estate investing an attractive and profitable option.
There are various ways to invest in real estate, meaning an investor must purchase a house or a property for gainful consideration. For instance, they can undertake real estate investing through Real Estate Investment Trusts (REIT) funds. Real estate is a long-term investment avenue, so it should be done after careful planning and research. Real estate investing for beginners calls for buyers to know a few key factors that will help them in their investment journey.
Key Real Estate Investing Factors
Location
The property’s location is a primary factor to be considered while undertaking real estate investing for beginners. An investment property’s return is directly proportional to its location, neighborhood, amenities, and connectivity. A property remotely located could lead to a low return on investment over time. While buying property, one should consider its connectivity to schools, hospitals, and markets. Such amenities should be within reachable limits from the location selected. The location, therefore, is of prime importance while finalizing a property.
Regulatory Approvals
Real Estate Regulatory Authority (RERA) Act, 2016 calls for stringent checks and guidelines to be followed by real estate developers. Despite these measures, there are bound to be land and property-related frauds. A real estate investor should be assured that the investment property has all the regulatory approvals and documents. A few of these regulations include RERA registration, Encumbrance Certificate, Completion Certificate, Fire NOC, and the like. An investor should consider help from a professional to ensure a property is purchased with a clear title. Otherwise, they could get entangled in time-consuming and expensive legal disputes.
Reputed Real Estate Developer
RERA has made it necessary for all developers to have RERA registration. So, investors should be cautious of projects which do not have RERA registration. Also, post-RERA implementation, real estate developers are bound to complete real estate projects on time. Before finalizing any property, a buyer should always consider the developer’s track record. Reputed developers follow all RERA-compliant rules and regulations and have proper systems. It reduces the risk of fraud or delays in property possession. So, investors should prioritize projects of reputed developers.
Negotiate with the Developer
Before finalizing an investment property, the buyer can negotiate with the seller for benefits like extra car parking, free parking, furnished property, etc. Many builders allow property buyers some amenities at a good deal if they are convinced that the buyer is genuinely interested in the real estate project. Beginners could also get a good property deal in such a bargain.
Property Appreciation Value
Any property investment should be undertaken from a long-term perspective. A buyer should finalize a project based on their future lifestyle needs, like the potential scope for infrastructure development or the appreciation value for the property. It will help them get good value for their property when it goes for redevelopment or even when they think of selling it in the future.
Financing Options
Real estate investing is huge, so the money factor is significant. There are various financing options available for purchasing a property.
Own funds
One could be buying a property upfront with own money. It would also mean the investor could save on loan interest charges.
Home Loan
An investor could also consider a home loan if they do not have surplus funds at their disposal. After evaluating all the home loan terms and conditions, they go for a home loan. For example, a clear title is a prerequisite while applying for a home loan. Many reputed developers have tie-ups with banks. So, getting a home loan could be easy for a buyer who invests in the developer’s property. Even non-banking finance companies (NBFC) offer home loans at attractive terms. However, it is suggested that buyers undertake good research about various home loan options before finalizing the home loan.
REIT
REIT funds are another real estate financing option available for an investor. REITs are companies that own multiple properties that can generate income. These companies undertake REIT investing by managing the portfolios of high-value real estate properties. They also finance these properties. For instance, REIT companies own multiple properties that are rented out. The rent received is the income generated for them. The income from the REIT investing gets divided amongst the investors. REITshave come into being as it may not be feasible for individual investors to invest in high-end properties individually. REIT investing (Equity/Mortgage/Hybrid) types are akin to mutual funds, wherein investments from different investors get pooled together to generate income. Likewise, REIT investing is also classified based on privately traded, publicly traded, or public non-traded REITs as per SEBI guidelines. The invested amount is applied for purchasing properties and generating income from that. Investors not looking for self-occupation can consider investing in REIT funds to diversify their portfolio, gain capital appreciation from real estate investing, earn dividends from investments, and have higher liquidity.
To Sum Up
When buying property, sound financial planning and decision making is required. Property decisions should not be made in haste. To get the best value from real estate investing, investors should consider the above factors before purchasing the property they choose. If a buyer has a shortage of funds, they should think of reputed home loan platforms like Tata Capital. Tata Capital provides home loans at attractive terms, helping buyers realize buying their dream homes. For more information on getting a home loan, visit Tata Capital.
01 July 2024
6 mins read
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