6 Benefits of Investing in Real Estate in India
Last Updated on, September 8, 2022
A smart investment can be life-changing. It has the potential not just to change your life, but even the lives of your offspring. Gone are the days when people relied on a single source of income and traditional savings to become financially independent.
Today, investment portfolios include a variety of assets, such as stocks, mutual funds, gold, crypto, and much more. While all these assets are popular, real estate continues to occupy the lion’s share of the total assets of a typical Indian. According to a report, 77% of the total assets of a typical Indian household are in real estate.
Since the demand for real estate is always on the higher side, real estate makes for a great investment option in India. Buying a new home is always a dream come true for Indian households. While fulfilling this dream gives you emotional satisfaction, it also promises financial growth, as real estate investment in India has a good ROI.
Here are some reasons real estate continues to be a preferred choice of investment for millions and billions of Indians:
1. Appreciation of Value
Real estate, especially in urban areas, is bound to appreciate due to scarcity of land. It is said that the longer you stay invested in real estate, the more money you make. The value of a good real estate investment increases over time. Rents also typically increase every year, this ensures higher cash flow. History is proof that the real estate market is back on track, following even the most uncertain times. Be it the 2008 economic crisis or the recent period of the pandemic, the prices returned to the same level and even escalated further. Hence, real estate provides you with good control over your investments, unlike stocks where the risk of loss is high. If you buy a property today, even your children can use it years later. In this way, you can build generational wealth by purchasing real estate property. If you’re buying real estate as an investment, consider investing in high growth potential locations to maximise your returns. Panvel for instance would be a good long-term investment location, where the upcoming Navi Mumbai International Airport and the Trans Harbor sea link are bound to spur growth.
2. Sufficient Cashflow via Rental Income
By investing in real estate, you can generate consistent cash flow. A monthly rental income is a great way to build a good passive income. It offers great financial security to the investor. If you are someone who is about to retire, income from your rental properties can ensure that your retirement life is hassle-free. In Mumbai, the rental yield on residential properties can be between 2-4%, and that on commercial properties can be as high as 6-9%. If you want to invest in real estate only for the purpose of generating passive income, it would make sense to invest in a premium office space in Mumbai.
3. Safe & Secured Investment Option
Real estate is a relatively safer investment option than other assets like stock markets and crypto. Stocks and bitcoin are too volatile investment avenues in uncertain conditions like pandemics, inflation woes and recession. Real estate, on the other hand, has witnessed consistent growth in the last few decades. With the introduction of the Real Estate Regulatory Authority (RERA), the lower interest rates on home loans, and lower stamp duty in a few states, sales in the real estate sector have further increased because of these factors. Unlike stock markets and crypto, which are too vulnerable, the prices of real estate are steady and less susceptible to frequent fluctuations. This, of course, comes with the caveat that you should invest in a ready home, where there is no risk of delays, or invest in under-construction property only with a good developer with a solid track record and after the requisite due diligence.
4. Decent Return on Investment
The real estate returns in the majority of Indian cities surpass the inflation rate. Hence, it offers you real profits in the long run. Unlike stocks, gold, and crypto, the investment process in real estate is quite structured with RERA, well-documented and established court precedents, and established legal procedures like stamp duty and registration once done, the chances of theft or any fraud are minimal if you’re investing in a reputed builder’s project.
5. Tax Benefits
When you invest in real estate, you can also save your taxes. There are quite a few tax benefits of investing in real estate. If you have opted for a home loan, under section 80C, you can save up to INR 1.5 lakh on the principal amount. Similarly, as per section 24, you can also save up to 2 lakhs on the interest payable. In this way, you can make investing in real estate more affordable and also reduce a significant amount of taxable income.
Leverage is one of the biggest benefits of investing in real estate. Leverage means borrowing capital to fund your real estate investments. It helps you increase your buying capacity. For instance, let’s say you buy a house costing 1 crore. You can pay as little as 10-15 lakhs down payment from your savings and take a housing loan to cover the rest of the cost. In this way, though you put only 10-15% of your money, you are the full owner of the property. Over the years, the property value will keep increasing and you’ll get a great ROI without putting your entire life savings into it.
Things to Consider While Investing in Real Estate in India
Like every investment asset, real estate comes with a few risks. Hence, here are a few things that a beginner should keep in mind while investing in real estate:
Know the Purpose of Your Investment
Buying a property in India can cost several lakhs or even crores, which is a humongous amount by any means. Hence, it is important to question yourself as to, “Why are you investing?” Is it to generate a passive income via the rental yield? Is it for the end use or it is for a high return on investment? Based on the purpose of your investment, you should decide on the ideal budget and the location. For example, let’s say you want to buy a property in Mumbai only for high growth. In that case, it’d be wise to invest in emerging areas like Kalyan-shil road or Panvel which have a good growth potential owing to their futuristic location. If you buy a property at these locations, you may get phenomenal returns in a decade. At the same time, if you are buying a property for end use, you should buy in SOBO to experience the glamorous lifestyle of Mumbai.
Check the Location
One of the most important things while investing in real estate is to check the location. If the property is located in a developing area, it improves the quality of living. You have easy access to facilities like offices, schools, hospitals, malls and excellent social life. In short, location drives attraction, attraction creates demand, and finally, the higher demand leads to an increase in price.
Check the Property Papers
Whether you’re buying an under-construction property or a ready-to-move-in property, it is important to check the property papers and ensure that the property has clear titles. You should also check for the Occupancy certificate and RERA details if you are investing in an under-construction property. You can take the help of a legal expert to verify all the property papers. This will save you from a lot of trouble later on.
Thoroughly Research About the Property
Buying a home is one of the life-changing decisions of your life. Doing a thorough background check about the property is essential. All you have to do is ask the right questions. If you’re buying an under-construction property, check the track record of the builder, the amenities on offer, the payment plans, price per sq ft, the construction quality, possession date, hidden costs, if any, etc. Similarly, if you are buying a resale property, it’d be wise to check the overall quality of home and know the reason the property is being sold. A full-fledged research will make your investment hassle-free and save you from any regrets later.
The Earlier You Invest, More Benefits You Reap
One of the biggest asset when you invest in real estate early on is time. If you’re in your late 20s or early 30s, you have plenty of time to pay off home loans and plan your finances well. This time gap may also make you eligible for extended loan repayment methods that come at a lower interest rate. Hence, you can select an optimum loan repayment tenure. In your early 30s, with atleast 25-30 years of professional life ahead, you also have enough time to mitigate or manage any risks that come your way. Read our blog to know the ideal age to invest in real estate.
Buying a property can be one of the best decisions of your life, given the bullish run in the Indian real estate market. Investment in real estate is also the best hedge against inflation. Moreover, it is an investment that empowers you to lead a luxurious life, secure your future and leave a legacy behind for the next generation.
Marathon Group has been at the forefront of real estate development in Mumbai. From luxurious residential towers & premium commercial spaces to affordable budget homes in Mumbai, we have built spaces that cater to people from all walks of life. Explore all our ongoing projects!