Reasons why NRIs are moving to Indian Commercial Real Estate ✓ Growing market ✓ Urban development policies ✓ Growing demand for office spaces ✓ MNCs in India ✓ Government reforms in favor of Foreign Investors
Real Estate Investment 101 - Selecting The Right Market
A real estate investment is made successful by the interplay of many factors. While the location is truly a major component in making the investment possible, it is not the only one.
Real estate investing is invariably one of the best options to park your money for a long or short period of time. The regular and definite asset appreciation, low risks, and tangible nature of the property make it a great investment.
What is real estate investment?
Real estate investment is the process that involves the purchase, rental, management, ownership, or sale of a real estate property to generate an income.
Real Estate Investment In India
Real estate investment is one of the most secure investment options in India. Characterized by appreciation in its property value, and a growing number of MNCs and international companies setting up their bases in India, real estate value is appreciating and is expected to appreciate at a greater rate in the future, making it a great investment option in India.
The latest real estate trends in India have shown that residential real estate in Mumbai and commercial real estate investment in Bangalore have hit a new high within the past ten years.
Housing real estate has become one of the most wanted assets in post-pandemic India, especially in Mumbai. Real estate investments in Bangalore and Hyderabad have been considered great for commercial real estate. But the investment can only be beneficial when you access it through the right platform or invest in a good market.
How to select the right market?
Some factors that play an important role in determining the value of a market and making it a profitable investment are
Some real estate markets are more investor-friendly than others, these can be differentiated on the basis of taxes charged and landlord/tenancy laws.
It really pays to understand the following factors
Property Tax Rates
Tax rates depend on the government, locality and festive seasons. While in times of inflation, the prices can go really up, the tax rates can also go down during festive seasons.
Property Insurance rates
The insurance rates also vary depending on the locality, neighborhood, and susceptibility to natural disasters or any other damages.
Municipal Landlord Taxes
These taxes are paid by the landlord. Each landlord falls in one of the three categories: either they don’t earn enough to pay tax (rental income), you pay tax on a 20%rate, or a third category where you pay 40% tax.
Local landlord/tenant laws
Tenant/landlord laws can vary from one area to another, the laws give rights to tenants and landlords to help come to an agreement which is beneficial for both sides.
A locality going through economic decline will not make an ideal investment. Therefore economic health of a locality is also essential to be considered. An expanding population makes the locality a good prospective investment. Similarly, the availability of jobs and newer opportunities, wage rates also help understand the economy.
Real Estate Factors
These usually focus on understanding the market from an investment point of view
- Rental to owner occupancy ratio -If a locality has more rented properties, then it will easily make a better investment for landlords.
- Vacancy rates in the market at the time of purchase – Time plays a very critical role here. Even a low-priced property is no good if you have no one to rent it to.
- Housing sale statistics – Buying a property at a decent rate is one thing, but being able to sell it off easily can be understood by a detailed study of the market and housing sale statistics.
Local Market Factors
After going through all the factors mentioned above, it becomes essential to also evaluate these factors on a local level. You might want to look at the quality of the neighborhood, safety, schools, and their quality, transportation, and access to amenities, proximity to shops, and nearest places of employment and shopping.
In conclusion, following the above-mentioned points can make your investment fairly easier. While most investors find local properties more profitable, one can also invest in real estate remotely and never have to worry about asset management, whether it is through Fractional Ownership platforms or trying Real Estate Crowdfunding.
Assetmonk is a real estate investment platform that offers high-end CRE (Commercial Real Estate) investment deals in the form of fractional property or crowdfunding models. The company offers an IRR of up to 21%.
Real estate investing 101, is a special guide for young and new investors to follow and make educated investments.
One of the best qualities of real estate investment is that they provide a hedge against inflation, which no other asset class can provide.