For almost two years, the Indian real estate market has escalated during the COVID-19 pandemic. Eventually, the real estate industry continued to perform well and is expected to rise exponentially in the coming years.
Investing in real estate has long been considered one of the most effective ways to build wealth and achieve financial security. Whether you’re a seasoned investor or someone looking to diversify your portfolio, real estate can offer a range of opportunities. However, like any investment, it comes with its own set of advantages and challenges.
In this article, we will help you determine why real estate is a good investment option in India.
Market Trends & Opportunities in Real Estate in 2023
Independent studies state that Indian corporations will fund around INR 3.5 trillion through real estate investment trusts in 2024. From residential to industrial properties, metropolitan cities are thriving real estate markets in India.
With the introduction of the Real Estate Regulatory Authority (RERA) Act 2016, many homebuyers feel safe and invest in properties like never before. Also, reduced premium charges and stamp duty charges notably increased the footsteps of mid-income individuals to buy their dream houses.
In 2022, the industry stakeholders proposed a provision of INR 48,000 crores for Pradhan Mantri Awas Yojana (PMAY). The scheme has fostered many individuals, especially the lower middle class, to own affordable homes.
Benefits of Investing in Real Estate
Let’s read investing in real estate for beginners benefits:
It’s one of the reasons why you should invest in the real estate market as it has the potential for making a steady stream of rental income. You can enjoy a reliable monthly income if you choose the right property in a high-demand area.
Real estate properties often appreciate over time, making them an excellent choice for long-term wealth building. Historically, real estate values tend to increase, allowing investors to benefit from capital gains.
Real estate investors can take benefits of various tax incentives, such as deductions for mortgage interest, property taxes, and depreciation. These tax benefits reduces your overall tax liability.
Real estate provides diversification for your investment portfolio. Unlike stocks and bonds, real estate often has a low correlation with other asset classes, which can help reduce risk.
Factors to Consider Before Investing in the Real Estate Market
Before beginning your search, ensure you are financially prepared to buy a house. Following are some parameters you must consider to evaluate yourself.
Healthy Credit Score
A credit score plays a crucial role in determining whether you can apply for a loan. The higher the score, the better the loan options available at a lesser interest rate. Your credit score is based upon:
- Your timely payment of EMIs, loans, and taxes.
- The total money you owe to banks or other financial institutions.
- The timeline of your credit history.
- Types of loans you have applied for.
Income & Employment Status
Ensure you are financially stable in terms of employment and other income sources. Before loaning, financial institutions will always check your job profile, work history, and family background to ensure you will pay on time.
Simultaneously, it helps you to be mentally prepared for taking the most significant decision of your life; because buying a house is a commitment. Right from your income statement to tax returns, put all the proper documents together.
Debt-To-Income Ratio (DTI)
The Debt-To-Income ratio (DTI) is one of the crucial financial instruments a lender uses to access your loan applications. It enables the lenders to evaluate the mortgage amount they can provide you after determining your monthly income with debts. It is calculated by dividing the monthly debts by your gross monthly salary. For instance, if your total monthly debt and income are INR 50,000 and INR 75,000, respectively, your DTI will be 66.67%.
Also, your lender will evaluate your credit score to make the lending decisions. In most cases, you will need a DTI of 43% or less to qualify for most of the mortgage loan options. After evaluating the necessary financial instruments and deciding, it’s time to set a budget.
The Challenges of Real Estate Investment:
Investing in real estate requires a huge amount of capital. You’ll need to consider the down payment, property maintenance costs, and potential renovation expenses.
Owning rental properties involves the responsibility of managing tenants, maintenance, and potential issues. If you need more preparation for the workload or prefer a hands-off approach, real estate investment may not suit you.
While real estate tends to be less volatile than the stock market, it is not immune to market fluctuations. Economic downturns can impact property values and rental income.
Real estate is a moderately liquid investment. Selling a property can take time, and you may be unable to access your investment quickly in case of financial emergencies.
Is Real Estate Investment Right for You?
To determine if real estate investment is right for you, consider the following:
a. Financial Situation: Assess your financial health and whether you have the necessary capital to invest in real estate without straining your finances.
b. Time and Commitment: Are you willing and able to dedicate time to property management, or do you prefer a more passive investment approach?
c. Risk Tolerance: Real estate investments carry risk, and your risk tolerance should align with the potential rewards.
d. Long-Term Goals: Consider your long-term financial goals and whether real estate fits into your overall investment strategy.
Investing in real estate can be a rewarding venture for those who are well-prepared and understand the challenges and advantages it offers. Before diving into real estate investment, carefully evaluate your financial situation, risk tolerance, and investment goals.
If done strategically, real estate can be valuable to your investment portfolio, helping you build wealth and achieve financial security over time.
If you’re looking to buy a home in 2024, our real estate consultants can help you find your dream home. To book an appointment, click here, and fill out the form. Our professionals will reach out to you.
1.What is real estate investing?
Real estate investing involves purchasing properties with the goal of generating rental income, achieving capital appreciation, or both.
2. Is real estate a good investment for beginners?
Real estate can be suitable for beginners, but it’s essential to educate yourself about the market, financing, and property management before diving in.
3.What types of properties can I invest in?
You can invest in various property types, including residential (houses, apartments), commercial (office spaces, retail), industrial, and even vacant land.
4.How do I choose the right real estate investment strategy?
The best strategy depends on your financial goals, risk tolerance, and expertise. Research and consider factors like location, property type, and market trends
5.How can I make money in real estate investing?
You can make money through rental income, property appreciation, and various investment strategies like flipping, wholesaling, or REIT dividends.