You will come across plenty of inspiring stories of people making money in the Indian real estate markets. But often the new investors who wish to enter the industry, wonder how they make money in the industry.
Did you also come across the same question?
There are many ways to do so. You can invest in the Indian real estate market through different options like pre-leased properties, fractional properties, REITs, etc. In this blog, we will look at all these lucrative real estate property investment options you can explore as an investor and things to keep in mind before you do that.
Things Beginners Should Know Before Investing in Indian Real Estate Market
1. Real estate is influenced majorly by local metrics
Unlike other countries like the U.S.A., our real estate markets operate due to indigenous factors. Hence before investing, you must know the Indian real estate market is driven locally.
2. Real estate investments are for long term
If you are investing in real estate for quick returns, you might be disappointed to know that you are investing in the wrong category. For example, if you are investing in a plot or property which is still under construction, you will have to wait for a few years before you can occupy the property or lease it out to someone to generate returns.
3. Keep in all the tax regulations
As a real estate investor, you must be mindful of the rules and regulations surrounding taxes. Whenever you get returns on your investment, you have to pay a certain proportion of your gains as tax to the government. Also, you will find some laws that help you with bringing down your tax liabilities.
4. Know about all the monetary burdens you will encounter
Before investing in real estate you must be knowledgeable about stamp duties and registration charges that one has to incur in property investments. These charges constitute a major part of the state’s revenue. Therefore, it can be a good decision to gain knowledge about these rules and guidelines.
5. Gain some domain and investment knowledge
Before finalizing a deal with a property broker, go through the entire document for authentication and credibility purposes. Moreover, rely on RERA-approved projects to avoid malpractices in the market and, if possible, hire a property lawyer or legal advisor’s services to avoid future discrepancies and inconveniences.
These are some things you must know before investing in real estate. Now, it’s time to look at some of the methods and ways of real estate investments that can help you generate some lucrative returns.
Methods to Invest in the Indian Real Estate Market
The biggest benefit of investing in the Indian real estate market is that there’s no single way of investing. You have plenty of categories you can explore and invest your money in. Let’s look at some of the real estate investment categories in brief.
1. Pre lease property
Investing in a pre-leased property can be a good decision for your investment portfolio. A pre-leased property is a property that has existing tenants during the time of sale. After the sale of the property, the new owner gets the lease and has the right to the rental income. Pre-leased properties offer you a variety of benefits such as liquidity, capital appreciation, low to medium risk, easy loans, etc. Due to these benefits, you can invest in pre-leased properties and get a great ROI.
2. Fractional properties
Fractional ownership is another way of making money in Indian real estate marketing. Fractional ownership of property refers to the collaborative consumption of a property. In this form of investment, a group of investors come ahead and invest a particular amount to gain a fraction of the whole ownership of the property. This form of investment is lucrative for those who don’t wish to get a majority of their savings occupied in a single property investment and have a diversified investment portfolio.
A Real estate investment trust (REIT) is an organization that either has the possession or right of operating on income-generating properties. REITs offer liquidity compared to other real estate assets. And mostly REITs are publicly traded stocks. But for non-exchange traded REITs you must take care of share exchange value, less liquidity, and other factors that might as a risk to you.
4. House flipping
If you know the real estate industry and know about evaluating and renovating properties, house flipping can be a beneficial category to you. In layman’s terms, you buy a property and either hold it for the right time to sell or renovate it and sell it for a higher value. Your primary responsibility in house flipping is to make the property market-ready.
5. Rental Properties
Lastly, rental properties are another category where you can invest to generate some healthy returns. You can invest in a rental property and lease it out to a tenant. This form of real estate gives you the benefit of generating monthly returns on your investment. However, sometimes investing in rental properties can be a headache if you don’t perform a background check on the tenant.
Investing in these categories won’t make you go through any tedious process. Moreover, you will also get the benefit of assured monthly returns and capital appreciation if you look to invest in pre-leased properties or rental properties.
How to Maximize Profits in the Indian Real Estate Market?
If you wish to maximize your profits in the Indian real estate market, you must take care of the following factors:
1. Invest in pre-leased properties
We discussed all the benefits that pre-leased properties offer. Investing in a pre-leased property will help you avail great benefits in the real estate market.
2. By making smart investment decisions
Once your investment starts fetching lucrative returns, you can look forward to investing in other real estate categories and explore different options.
3. Make the most of forced appreciation
Forced appreciation is adding new facilities and amenities to the property, increasing its rental value as per the market, or doing capital enhancements that help you increase the property’s value.
Real estate investment can seem daunting at first. However, unlike other forms of investments, real estate offers you steady and stable returns throughout your investment timeline and helps diversify and stabilize your investment portfolio.