Navigating through the vast domain of investment, real estate emerges as a stalwart, blending tangible assurance with formidable financial returns. Whether it’s the intrinsic value of physical assets or the stable growth trajectory, real estate invites investors with a promise of security and substantiality, especially crucial in volatile economic climates.
Why choose real estate?
Let’s delve deeper, organising the magnetic allure of real estate:
Tangible security and appreciation
Tangible investment: A physical asset providing a robust financial backup and a sense of concrete assurance.
Appreciation potential: With a recorded 8.7% (as per the Knight Frank Residential and Office Market Report H1 – 2023) appreciation in key Indian cities, real estate promises growth.
Revenue and diversification
Steady rental yields: Urban influx is intensifying the demand for rental properties, generating steady revenues. Residential averages to about 2-3% and going as high as 4% in prime areas (JLL Research). Commercial properties deliver even higher yields.
Portfolio diversification: Acting independently from stock market fluctuations, real estate offers diversification and risk mitigation.
Technology and accessibility
Fintech and real estate: Technology has simplified the real estate investment process, making it efficient and accessible.
Democratisation through fractional ownership: Platforms now enable a broader spectrum of investors to explore and partake in high-yielding real estate opportunities.
Commercial real estate potential
Alternative to residential: The realm of commercial real estate extends opportunities beyond residential properties, offering higher yields (6-9%).
High-return accessibility: Once exclusive to HNIs, tech-enabled strategies like fractional ownership enable wider access to commercial properties.
Tax and financial incentives
Tax advantages: Tax deductions and benefits, particularly on home loans, enhance financial feasibility for investors.
Embedded within these points lie the combined rationale of seasoned and emerging HNIs, alongside an ever-evolving global investor base, heralding real estate not merely as a strategy but an adaptable investment philosophy.
Strategies for real estate investment
Navigating through the layered terrains of real estate demands an astute strategy. Here’s a guide through the fundamental pathways:
Locational acumen: Identify potential hotspots with promising infrastructure and developmental prospects.
Robust valuation: Ensuring accurate property valuation to ascertain intrinsic worth and safeguard against overpricing.
Purpose and time horizon: Establishing a clear objective and timeframe to align with market cycles and investment goals.
Cash flow and profit analysis: A meticulous evaluation of expected incomes and profit margins to ensure fiscal health.
Prudent leverage: Wisely balancing the use of borrowed funds, mitigating risks while optimising profit potential.
Property-type decision: Considering variables like cost, location, property condition & resale value, decide between new constructions and existing properties.
Indirect investments: Diversifying via REITs and fractional ownership of commercial real estate to access premium properties without direct /complete ownership hurdles.
Credit score management: Maintaining a healthy credit score for advantageous loan terms and better financial flexibility.
Market trend awareness: Keeping an informed eye on market dynamics, policy shifts, and other influential factors.
By intertwining informed strategies with the lucrative and stabilised aspects of real estate investments, investors can sculpt a resilient and prosperous portfolio, harnessing both the traditional and modern virtues of the real estate domain, making it a timeless and adaptive instrument in the global investment symphony.
Aryaman Vir is the CEO at WiseX
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Updated: 22 Oct 2023, 11:43 AM IST