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During or even after the pandemic, every industry was hit hard, including the real estate market.
But as per the industry experts, the unstable stock markets and under performing mutual funds are the main reasons for this hard hit. But, when it comes to finding an investment, the investors watch out for a very secure asset criteria. It would be an investment for them to get a profitable return in the future.
What is Real Estate Investment?
Real Estate investing means purchasing the property (land, building, infrastructure, and other immovable but transferable, tangible property) as an investment to generate income. Real estate investment can be considered a secured form of investment.
Examples of Real Estate properties are houses, office buildings, agricultural land, commercial plot, Etc. Classification of Real Estate
Real Estate includes various properties, which are:
- Residential Real Estate: It consists of a home (newly constructed property, house to be resold by the owner), i.e., single, duplex, triplex, township, bungalow, Etc., used for residential purposes.
- Industrial Real Estate: It consists of large-scale properties used to construct factories, manufacturing units, warehouses, and distribution centers.
- Commercial Real Estate: It consists of properties or office buildings such as a complex, which are divided into multiple small units rented out or used to run various businesses.
- Retail Space: It consists of properties (individual or multiple units are located in prime locations) which include showrooms, restaurants, shopping malls, retail stores, Etc.
- Land: Any vacant land where activities like ranching or farming occur.
- Fix and Flip Properties: It includes residential properties that are poorly maintained and available at a low price. When you buy these properties, you have to bear the cost of renovation and repairs and then sell the property at a high price.
- Mixed-Use: It is a single high-end real estate project which contains different types of properties (Residential, Industrial, Commercial, Retail, and Land) to ensure diversification and minimize the risk of project failure.
Features of Real Estate Investing
- Tangible: Real Estate or properties have a physical existence.
- Immune to Inflation: When economic inflation negatively impacts the value of other investments, Real estate investment is the only investment that results in value appraisal in adverse situations.
- Allows Use of Leverage: The financial institutions are attracted to the funding for real estate because of its physical existence.
- Uncertain Maturity Period: Real estate investment does not have any fixed maturity period; the owner can hold or sell the property anytime.
- Value Enhancement: Real Estate generates rental income, and its value keeps increasing in the long run.
Advantages of Investing in Real Estate
- Hedge Against Inflation: Value of the property and thus income increase with the rising economy.
- Rent Pays Off for Mortgage: Residential and commercial properties can generate income through rentals. You can pay out your loan from them if you have taken a property loan.
- Stable Income: It can be a source of generating passive income. The investors can rent out their property and receive regular and steady cash inflow.
- Tax Benefits: Real Estate investors relish tax exemptions on the rental income up to a specific limit.
- Financial Security: Investing money in real estate is a long-term investment. The investor has the possession of a physical asset, which provides a sense of financial security to the person.
Disadvantages of Investing in Real Estate
- High Maintenance and Management: Real estate investment means buying a physical asset that involves the expenditure on its maintenance.
- Huge Transaction Cost: Buying and selling properties is costly. When you sell a property, it involves transaction costs (registry charges, legal expenses,diversion), which increases the buyer’s investment cost.
- Creates Financial and Legal Liability: The investor may become overburdened by the financial liability when buying a property on loan. Moreover, the transfer of ownership when purchasing a property creates a legal obligation on the investor.
- Less Liquid in Nature: Real Estate cannot be easily bought and sold regularly.So, investing in real estate may not be a suitable investment option for investors looking for short-term profits.
- Requires Dealing with Market Inefficiencies: Sometimes, the investors who lack the necessary information about the prospective real estate project pool their money on unprofitable projects.
The best market for real estate investment in India in 2022
Investing can be a game-changer in one’s life. Property investment in real estate is one of the best investments you can make. Here are some cities in India to invest in Real Estate:
1.Noida
The property market in Noida has grown well over the years, with new industrial and commercial centers driving up demand for residential properties. Non-Resident Indians (NRIs) have also made significant investments in the region in search of higher returns and even self-occupation. The news of the Jewar Airport, which will provide direct access to international aircraft from Noida, has sparked curiosity.
Areas which may consider for investment in 2022 are:
- Sector 150
- Sector 34
- Sector 137
- Sector 150
- Sector 37
- Sector 93
2.Pune
Pune is the second-largest city in Maharastra. It is India’s “industrial and transportation hub” and India’s second-largest “IT hub.” In the recent decade, Pune has emerged as a significant educational hub. Pune has the fifth-largest metropolitan economy and the sixth-highest per capital income in the country.
3.Gurugram
Gurugram is one of India’s most promising new real estate markets. People are going in droves to invest their hard-earned money in houses in Gurugram for a variety of reasons, including:
- Close proximity to Delhi
- Excellent civic infrastructure
- Abundant job opportunities
- Excellent lifestyle infrastructure
- Organized sector
- Education hub
- Well-connected by all modes of transportation
- Good health systems in place
- Homes in all price ranges available
- Presence of leading hospitality chains
4.Chennai/ Madras
In the global city index, Chennai is ranked as a beta-level city. This city follows a mix of traditional and modern values. Chennai is also well-known for being a major film production center, and it has been developed as a smart city.
Reasons for Failure in Real Estate Investing
- Lack of Knowledge: To generate returns on the property, investors need to analyze very carefully, as failing to analyze the right time of investment or the potential of the property will not give good returns on its sum.
- Poor Management: The investor needs to pay attention to the maintenance of the property, contractors, budget, and tenants. As if the property is managed poorly, then the returns may deplete.
- False Calculation: Investment in Real estate requires a calculative and mathematical approach to determine future profitability.
- Giving Up Early: Investing in real estate will yield high returns in the long run. Some investors make mistakes by selling property at a low price in a short period.
Conclusion
Real Estate is a worthwhile and long-term investment, and the best way to secure your wealth and the future of your next generation is to invest in real estate. By now, you have understood various ways to make a living by investing in real estate. The value of the property will never depreciate; it will always appreciate. You can earn rental revenue by renting out your asset.
You’ll make more money than you would in any other market. Real estate investment yields significantly more income than a bank deposit.
