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5 things to remember before investing in real estate in India

Real estate is a long term investment that cannot be easily altered. An investor without any prior experience in this sector might get carried away and make uninformed choices. However, one must note that such purchases involve a huge sum of money, several risks and sometimes they might not even offer the expected returns. In the past, numerous individuals have preferred a rented accommodation over such options. The virus outbreak; however, has established the importance of owning a house. During the pandemic, realty emerged as the safest investment option. The driving factors behind this change are depreciating rates of the Indian Rupee and low-interest home loans. Before you make an investment here are some things to be noted –

Location and survey the property thoroughly:

Location holds paramount importance in property buying. Especially in the case of residential property, several factors such as accessibility to roads, public transport, distance to neighbouring cities, infrastructural developments, among others, come into play. A thorough analysis of the property helps in getting a better understanding of the potential as well as liabilities it presents. Also, buyers should take into consideration the blueprint of the property and the actual size of the house. It is advised that customers should review the property through RERA and employ legal assistance throughout the buying process for enhanced transparency. Another critical aspect to consider is safety. I suggest visiting the property more than once and at different times of the day to make the best possible assessment of the location and property.

Look at historical returns of existing investors:

IF there is an option of review a set of historical transaction data, it is essential to consider this information before purchasing a property. Despite real estate being market driven and cyclical, this data is likely to throw up some useful information regarding the demand for the property, rental yields and pricing.

Title

When purchasing property, the only thing that cannot change in the long term is title and therefore it is essential to investigate the title of the property through a reputed lawyer or legal firm. This is even more important in the case of secondary sales. Title related issues are extremely tedious and expensive to resolve. One should also look out for any charges/unpaid dues that are sometimes hidden in the property documents and sale agreements by the seller and broker.

Market Dynamics:

It’s essential to understand the dynamics of the property one is planning to invest in. For residential properties, buyers should check the numerous home loan interest rates, offers provided by the developers, and Government regulations such as reduced stamp duty for women customers.

REITs:

Since 80% of the underlying assets in Real Estate Investment Trusts (REITs) are required to be operational as well as income-generating, these have emerged as one of the most viable investment options as compared to conventional property purchase. It is a way of diversifying an investment portfolio in a low-risk way. Even though the pandemic has put them under the pressure of rental cash flows, the long term scenario remains intact.

As per the Knight Frank-FICCI-NAREDCO Real Estate Sentiment Index Q4 2020 (October – December 2020) Survey, the sentiment behind real estate scores at a year-high in Q4 2020, and the scenario in 2021 looks greatly optimistic. 2021 has great potential for both residential and commercial real estate businesses. Experts suggest that to make it a smoother pathway for investors and developers, the government needs to take more quick and bold corrective measures for the housing and urban infrastructure sector. Such support will play a crucial role in boosting the demand to an unprecedented level. In addition, it is expected that these initiatives will lead to widespread growth of residential and luxury real estate across the subcontinent. This trend is acting as a catalyst for an organized rental market in cities in India.

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Disclaimer

Views expressed above are the author’s own.



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