MENU
fav-icon
 
Compare

Blog banner

Why invest in real estate?

By LODHA 29 July 2020

For a person looking to make long-term investments,key asset classes available include commodities, fixed deposits, equities, and real estate. From an asset allocation perspective, experts advise that one should spread out their investments to reduce risks and ideally have a mix of physical investments as well as financial assets present in the portfolio. When it comes to physical assets, real estate has always been among the top favorite for investments.

Why investment in real estate helps?

With limited availability of land, increasing population and people migration from one city to another, realty investment has an upside potential. Moreover, the government’s push for affordable housing, tax rebates and subsidies offered, as well as lower rate of interest offered by banks, makes real estate an attractive investment. One can benefit by real estate investment in multiple ways. You will earn rental yield and also its value will appreciate with time and development of location.

Secure investment: Compared other investment assets, real estate is less volatile since it is not traded. A study undertaken by  Jordà-Schularick-Taylor Macrohistory Database funded by the Institute for New Economic Thinking (INET) asserts that ‘residential real estate, not equity, has been the best long- run investment over the course of modern history’. Additionally, with the rate of interest on home loans being lowest ever in the past 15 years, now is good time to invest in real estate.

You are also likely to get a good deal on the property, since with a bid to give momentum to the market, many developers have come up with attractive schemes and deals. For instance, considering consumer feedback that the key impediments to home ownership are high upfront down payment and paying both rent and EMI together, Lodha Group has launched ‘Apna Ghar, Apna Desh’ initiative. It offers the option of a very low down payment, low interest rates of 5.99% on EMIs and ready-to-move-in homes where one does not pay rent and pre-EMI at the same time.

Rentals: Currently, the net rental yields in Mumbai, Bengaluru and National Capital Region (NCR) are around 2- 3% per cent, according to 2019 Knight Frank and Khaitan & Co report. With the national average of 3% percent, the rental yields in India are higher than in Beijing, Singapore and Hong Kong. Generally, investing in affordable to mid-segment properties will bring you higher rental yields, provided external factors like location, reputation of the builder, infra development are aligned.

Additionally, with the government drafting a new rental law, interests of investors will be protected with the rules and regulations in the rental segment streamlined. Also, there are a couple of tax benefits while calculating tax on rental income.

Tax Benefits: Real estate investments have a lot of tax benefits attached to it including section 80 C where you can claim benefits on paying the principal amount of the home loan, section 24, where you can claim tax benefits on the interest on the home loan that you pay for. Also, first time home buyers can claim a tax deduction on interest paid under section 80EEA. However, this facility is for investing in a property in the affordable housing segment whose value is Rs 45 lakh or lesser and other conditions need to be fulfilled.

Factors to keep in mind when investing in real estate

Research: Do a thorough homework on the location, configuration, the returns expected of the investment, the rental yield and then zero in on the project. Do check on the upcoming locations as they may be less expensive to purchase presently and may give you good returns in future. Ensure you enter into real estate transaction with a reputed RERA certified branded developer.

Plan your financials: Of the total money that you have allocated to invest, first decide on how much you want to divert to real estate and then take action accordingly. Unlike other asset classes like mutual funds or fixed deposits, entering into real estate is a large investment and mostly requires borrowing. Thus, it can occupy a large part of your overall financial portfolio, which can be risky if not well thought of. Transaction costs like stamp duty and registration need to be factored in.

Difficult diversification: Unlike mutual funds, diversification is difficult in case of physical real estate.

Articles series powered by Housing.com

TAGS

Similar Blog Posts

Buying-Guide

Smart cities: transforming o...

BY Lodha
15-07-2020

World over, there are several cities that are transforming themselves and providing better lives

TAGS

Buying-Guide

Things to consider when choo...

BY LODHA
07-08-2020

Once you have zeroed in on the property that matches with your preferences of a developer, budget

TAGS

Buying-Guide

Decoding EMI for you...

BY LODHA
21-08-2020

Thanks to several government initiatives like reduction in stamp duty and other tax benefits, the

TAGS

Buying-Guide

Your Guide for Buying a Week...

BY LODHA
11-09-2020

Usually located within couple of hours drive from the city, weekend homes are set amidst nature a

TAGS

Living Belmondo
Buying-Guide

New GST rates - explained...

BY Lodha
08-03-2019

The Goods and Services Tax Council has proposed a reduction of the taxes levied on under-construc

TAGS

Commercial
Buying-Guide

Things to look out for when ...

BY LODHA
10-04-2020

The process of home buying has undergone a sea of change for the better. Today, you will find the

TAGS

Buying-Guide

Ready-to-move-in vs. under c...

BY Lodha
04-06-2020

One of the most common dilemma you face when buying a house is whether to invest in a ready-to-mo

TAGS

Residential
Buying-Guide

Integrated townships – all...

BY Lodha
03-07-2020

A well-developed township offers a plethora of advantages – a great community, better quality o

TAGS

Buying-Guide

It is always better to go fo...

BY LODHA
23-09-2020

W

TAGS

Buying-Guide

All you must know about avai...

BY LODHA
07-05-2020

Home loan is by far the most common type of loan that’s availed by individual

TAGS

Residential
Buying-Guide

Looking to buy a house post ...

BY Lodha
29-05-2020

The COVID pandemic has brought about sweeping changes in our lives. It has compelled us to view t

TAGS

Buying-Guide

Tips to repay your home loan...

BY LODHA
03-04-2020

Despite the recent reduction of interest rates on home loans by most banks and NBFCs, the burden

TAGS

Buying-Guide

Ideal Age To Buy A Home- Sho...

BY Lodha
20-03-2020

Owning a home continues to be a priority for most Indians. However, this is step is generally tak

TAGS

Buying-Guide

Secure your investment, go w...

BY LODHA
27-03-2020

Akin to the way brands are preferred while buying utilities, developers who have established as a

TAGS

Services

Property Type

    Location

     

    Configuration(BHK)

      Budget (Approx.)

      Possession