Do’s and Don’ts of Real Estate Investments

do-and-dont

Real Estate investment has always been a lucrative option. It attracts a lot of investors for building on wealth as it promises good returns. Real estate covers housing, retail, hospitality and commercial sector.

The decision to invest in real estate requires a careful analysis of the

  • economic conditions
  • investment policies 
  • availability of funds

People invest in real estate for various reasons like:

  • Stable income (rental)
  • High Returns
  • Portfolio Diversification

Like all other investments, e.g. stocks, shares, mutual funds, etc., real estate investment has its share of risks. The risks can be minimized by taking reasonable precautions beforehand.

Read more: Increasing Benefits of Real Estate Investment in India

There are some dos and don’ts which can help to take the decision prudently to invest in real estate: 

  • Investment in real estate takes time to generate income and is highly illiquid. It is essential to ensure that there is enough cash to survive the lock-in period. The property should not become a liability. One should have sufficient savings required to deal with hidden expenses like government dues, taxes, maintenance charges etc.
  • It requires careful planning to ensure availability of funds for real estate investment. Unlike other forms of investment like stocks and shares, the risk is more. There is much more to lose than the amount invested. 
  • It is advised to understand the property where one intends to invest. For example, it is good to know if the investment is fruitful in residential or commercial real estate. 
  • It is better to go for investment in various properties than to concentrate on a single one. A person can distribute the investment in multiple properties as per the budget. A mix of residential and commercial real estate is better if finances permit.
  • It is not uncommon to find that real estate investors prefer to take professional help and legal assistance as the amount involved is huge. It also helps to handle the risk appropriately. 
  • Do not expect quick returns in the real estate market. The benefits are reaped in the long term.
  • Miscalculations and myths are common in the property market. Always collect the information from reputed sources. It is better to approach the professionals or business analysts or financial advisers, who are well informed and knowledgeable about the property market. The expected change in the market price of the property has a lot of influence on the decision of investment.
  • Do not invest simultaneously in various properties unless there is sufficient backup. Cash flow is restricted once the money is invested in real estate. It is significant to be wise before we chose the properties. One should invest in the second property only when the first one has started generating income. 
  • Always talk to property dealers or regular investors if you are a novice in the field. Taking legal advice and professional assistance proves fruitful.

Read more: NRI investments in Indian real estate sector

Why and where to invest in property in India

real estate investment

Real Estate investment has always been a lucrative option. It still attracts a lot of investors for building on wealth as it promises good returns. Real Estate covers:

  • Housing sector
  • Retail
  • Hospitality
  • Commercial

Indian Real Estate sector is also a good option for NRI investors as there is a lot of scope and potential for growth in a large number of Indian Cities.


Read: Increasing Benefits of Property Investment in India


There are many factors which influence Real Estate Investment Decisions:

  • Political Stability
  • Infrastructural growth
  • Connectivity of a place to airports and other major cities
  • Government Policies in General and Particular for the area – ease of business, transparency, speedy disposals of proposals etc.
  • Tax benefits
  • Quality of Life – Basic Amenities, Education and health facilities
  • High paying jobs – more beneficial for investment in the housing sector
  • Migration – Inflow of people
  • Prospects for future development
  • Emotional bonding with hometown – the special reason for many NRIs as they want to create an asset in their hometown to settle down after they come back to native place
  • Affordability

When it comes to choosing cities for Indian Real Estate Investment, Delhi, Mumbai, Chennai and Kolkata has always been a favourite. They have had their share of growth and development. There is saturation in the property market. The possibility of future growth is limited.  Now their periphery area is attracting investors, eg. Navi Mumbai.


Read: Investment Options for NRIs


Recently, the Tier II Indian cities are attracting real estate investment, as:

  • Government’s efforts: Indian Government’s Smart City projects under which they aim to develop Tier II cities by providing core infrastructural facilities, a decent quality of life and clean environment besides smart solutions. Economic decisions like GST and regulatory authority like RERA which has brought transparency and accountability are also boosting investment.
  • Property is available at affordable price and high Rental Income
  • Improving Infrastructure, health facilities and educational institutions
  • Migration

List of top most Indian Cities for Real Estate Investment with reasons:

  1. Bangalore – Infrastructure, Connectivity, IT sector induced demand
  2. Chennai –Rising demand due to fast-growing economy (manufacturing, health, automobile, technology sector), Affordable property rates and good rental rates.
  3. Mumbai – areas like Thane and Navi Mumbai enjoy proximity to Mumbai, Employment Opportunities, and demand for residential accommodations.
  4. Pune- Lot of migrants in the IT sector has drawn steady demand for further investment
  5. Hyderabad – Presence of IT employees raises demand in housing and retail sector, Connectivity to Airport and State Government facilities for investors
  6. Kochi – Government’s initiatives like single window clearance, discounts to NRIs for investing, better infrastructure, educational Institutions drawing migrants, all are leading to property sector growth.
  7. Ahmedabad – Employment Opportunities, Improved Infrastructure, demand for houses, Transparent and easy procedures
  8. Bhiwadi – City is catching up for Investment. Proximity to Gurgaon and International Airport, IT sector presence, Affordable prices, Infrastructure are an advantage.
  9. Thiruvananthapuram – Growing IT sector, City’s tourism potential, Infrastructure, Healthy Lifestyle.
  10. Coimbatore- City is close to many tourist destinations, upcoming infrastructural facilities, growing service sector including IT firms, Flourishing manufacturing and retail industries.

Read: Government Initiatives and NRI Investments in India


In case of NRIs, besides, the monetary reasons, emotional connection with their hometown for settling down in the future is also a major factor which drives their real estate investment decisions.

Indian Real Estate holds a lot of promises for good returns on investment.

Reasons for Investing in Indian Real Estate

Reasons for Investing in Indian Real Estate

A few decades ago, investing in real estate was a luxury, a way of boasting their social standing and not a necessity. But today, in this era of globalization investing your money in property is not merely imperative but also one of the most tried-and-tested ways to grow that money over the coming years. Following are a few reasons as to how investing money in the realty business is one of the safest bets for NRIs (Non – Resident Indians):

  • Stay Connected, stay rooted: No matter how much one loves living abroad, having a house back home in one’s own country gives a sense of belonging. Moreover, wherever you stay, at some point you are sure to say ‘Take me home’ country roads.
  • Rent Benefits: Having an extra property in India, would pose as an additional source for your income. Even though NRIs have to pay tax on the rental income, a part of it gets compensated under Section 80 (C).
  • Retirement Benefits: Senior citizens who own property in the country get benefits of Reverse Mortgage, i.e. money taken from the bank towards this Mortgage is not considered as a part of the income of the NRI.
  • Price Benefits: Along with the emotional connect and the benefits of rent, affordability of properties is yet another reason of why investing in real estate is lucrative for NRIs.
  • Long-Term Returns: The real estate industry has observed tremendous growth in the last decade or so and is further expected to rise by 10-15% per annum.
  • Controlled Asset: While in order to invest in shares and stocks you might require a broker, real estate investments are simple enough to be done on your own, especially with the various portals available for property purchase and sales such as Makaan.com and 99acres.com. These websites provide all the required information such as the localities and any and every query can be answered.
  • Ample Finance Options: From banks to the various Financial Companies along with numerous private lenders, there is truly no dearth of money in this business.
  • Pass onto next generation: Real estate properties can be passed onto the next generation, this is one such investment which will continue to grow and prosper. No other company or National Stock Exchange has topped the market in a row during the last decade.

Thus, investing in real estate would turn out to be the fruitful endeavour, which would not only benefit you but also your children and the coming generations.

Increasing Benefits of Real Estate Investment in India

Real Estate Investment in India

There is truth in the fact that the importance of land has remained same from time immemorial. Brothers fought brothers and kingdoms collapsed in this battle for land, and yet, we forget to learn from history and continue vying for what’s available. The prima facie fact that real estate never loses value or demand, makes it a great investment option, offering better returns than traditional investment ideas. There are a variety of reasons that make real estate investment so advantageous.

  • It provides great returns: Risk is a very important factor when we talk about good returns and that is minimised when real estate is held for a lengthy period of time. However, in other options like the stock market, the risk factor never goes away.
  • Better asset value: With increases and decreases in the market, there can be no value left in other investments, but your real estate investment will always offer tangible asset value. Home owner’s insurance also protects such investment.
  • Tax Benefits: One can get deductions in tax on various things such as mortgage interest, operating expenses and costs, cash flow from other investments and so on. It is always beneficial to contact a firm that deals in real estate to get more information on this, subject to the area where you want to invest. Accounts of rental repairs, utilities, maintenance etc should be maintained to make this job easier.
  • Steady passive income: Other than renting a property, profits can be generated by buying, selling and the ability to build equity on the property. It ensures that you get a passive income on the side, apart from your primary income.
  • It provides a hedge against inflation: With increase in inflation, prices of rent can also be increased with time. However, such a benefit is not necessarily offered with stocks or other investment options.
  • You will be the decision maker: Investing in real estate makes one their own boss and therefore, risk management is easier since the control is in the hand of the investment maker. Other factors will affect and cause changes in your investment, however, since you are the one calling the shots, the risk can be much better calculated.

Other than this, real estate investment in India is a very good early or regular retirement plan. If a person is well researched and knows the basics of how to invest, your property can ensure a steady income all through your years of rest from work. A few things should be kept in mind while doing the same:

  • One should be patient in choosing the property and the agent, to ensure that one doesn’t pay too much for a property and that the returns are as per your expectations and dreams.
  • Only a property with clear titles should be bought, otherwise, it will only lead to a series of court visits thereafter.
  • The price of the property should be checked properly with the local government records. A good real estate firm will easily do this for you.
  • Investment in real estate is never risk-free. However, it is a calculated risk that will offer great returns to you, unlike other investment options.
  • Negotiate your way through the process, for it will save you a lot of additional money and expenses.