If you want to invest in real estate, many experts believe the market to be beneficial right now. The sector is estimated to cross $ 4.8 trillion by 2047, contributing to more than 18% of the projected GDP. This remarkable growth is driven by rapid urbanisation, rising incomes, and evolving demographic trends, which makes real estate a promising investment opportunity.
The investment process may seem challenging, with the foremost question among investors being, “How can I invest in real estate?” Before diving into this lucrative market, understanding the right investment strategies becomes essential to maximise returns and make informed decisions that best align with your financial goals.
In this article, we explore some factors to consider, as well as the different ways to invest in real estate.
What Factors Should You Consider When Investing in Real Estate?
Before investing in the real estate market, there are certain prerequisites that you should consider. These include:
1. Determining your investment horizon: This refers to your investment timeline. It should be kept in mind that real estate delivers better results in the long term.
2. Determine your budget: You should also be careful to invest only that much you can afford. This will significantly reduce any financial stress in the future.
3. Consider professional guidance: You must consult a financial advisor who can help devise your portfolio to mitigate any risk in your investment.
4. Conduct thorough research: You must also conduct extensive research to ensure the property’s location is attractive and the construction company has an efficient track record. This also helps in updating your knowledge of current market trends.
5. Ensure legal regulations are followed: You should also confirm that the property you purchase has a clear title and is free from legal disputes.
How to Invest in Real Estate in India?
There are multiple strategies on how to invest in a real estate property. These strategies include investing in:
1. Rental properties
Purchasing a rental property is suitable for investors with the time and skills to manage tenants. This investment approach provides you with a regular income stream through monthly rent. You can also use this rent to acquire other attractive properties. However, this approach requires a heavy upfront cost, and renovations and maintenance are constantly needed.
2. Real estate investment trusts (REITs)
REITs are entities that own and manage real estate properties to generate profits. It is a more indirect way of investing, which works the same way as a mutual fund and is more suitable for inexperienced investors. REITs primarily invest in commercial income-generating properties like malls, hotels, apartments, and offices. REITs are listed on the stock exchanges and offer regular dividends.
3. Fractional ownership
This real estate investing approach involves owning a fraction of a high-end property. You can share the cost of a property with other investors instead of purchasing the whole thing alone. It gives you the benefits of rental income and capital appreciation with low investments. Since you do not have full ownership and control of the property, it can lead to potential disputes in the future.
4. Real estate crowdfunding
This strategy allows investors to pool their money and individually invest in large projects outside their financial reach. These investments are typically carried out through online platforms. It is devised to help developers of real estate ventures who may have limited funds to complete their projects. Through this, investors can access unique private market property assets without the added responsibility of managing those assets.
5. Flipping properties
This is a short-term approach typically employed by experienced investors. It involves purchasing an underpriced property, renovating it, and selling it at a much higher price, all within six months. However, this strategy requires the necessary capital to make repairs. Some investors may not even go for renovations and only purchase the properties based on their intrinsic value. The problem arises if investors cannot sell the property quickly and lack sufficient cost to cover the mortgage.
6. Real estate investment groups (REIGs)
REIGs work on the same principle as mutual funds. They are pools of money from investors who want to rent out properties without the burden of managing them themselves. Properties are bought from this pool of funds, and investors can purchase their own units.
The company that operates the REIGs will collectively manage all the responsibilities like maintenance, tenants, and advertising vacancies in exchange for a monthly fee. The best thing is you will receive some income even if the unit purchased by you stays vacant.
Wrapping Up
The real estate sector is quickly rising to become one of the most lucrative and stable investment opportunities. To make the most of this booming market, understanding the best strategies on how to invest in real estate in India can significantly enhance your chances of success.
If you are looking for favourable home loans, turn to Tata Capital. At Tata Capital, we offer appealing interest rates for housing loans without any collateral and with minimal documentation.
You can also use Tata Capital’s home loan calculator to calculate your home loan and plan your loan terms accordingly. Visit the Tata Capital website or download the app today to learn more!
FAQs
REITs are the most straightforward form of real estate investment, as you are not required to pay a huge upfront cost to purchase the property.
To invest in real estate, you need to look for a range of factors, like a robust job market, markets with low vacancy rates, ongoing infrastructure development, lower interest rates, and land-lord-friendly policies.
Direct real estate investing means owning and managing the purchased properties, like rental properties. Indirect investment involves investing in a pool of money and delegating the responsibility of managing the assets to others, like REITs and REIGs.
18 March 2025
5 mins read
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