How To Invest In Real Estate

The simplest way to invest in real estate is to buy or lease an asset for the long term and then rent it out to tenants–residential or commercial.

The process is simple but needs a significant initial investment and involves yearly maintenance and upkeep costs. Ensure that the asset is free from any legal hassles. Acquire it on a lease, buy it upfront, or through a loan.

This investing mode has been gaining popularity among people with experience in general contracting.

If you have the capital to spare, you can invest in a commercial or residential property that needs much maintenance, fix it up for good, and sell the asset at a much better price to asset/property management firms. The ownership of the asset is for a relatively shorter term, but if one has done their homework on the market beforehand, this kind of investing can generate good returns.

This method has fewer constraints regarding regular maintenance, registration work, and the like than owning a property forever. However, it requires you to be familiar with the market’s demand for and supply of real estate and the cost of the renovation work that you will attempt. Having an experienced partner in this helps.

The advancements in technology have paved the way for modern homes that have smart with aesthetically appealing features, and luxurious yet without compromising on the authenticity of a traditional good home. We see that urbanisation is on the rise and with it , the demand for modern and tasteful spaces, and luxury.

Whether earning money or buying a house , real estate has tried n tested ways to strengthen financial security for the new investors and home buyers.

What is the current situation of real estate in India?

India Real Estate Market Analysis

The Real Estate Industry In India Market size is estimated at USD 0.33 trillion in 2024, and is expected to reach USD 1.04 trillion by 2029, growing at a CAGR of 25.60% during the forecast period (2024-2029). India's real estate market was affected by the COVID-19 pandemic.

India Real Estate Market Trends

Increasing Demand for Affordable Housing

• The high demand for affordable housing dominates the housing market. The current shortage of housing in urban areas is estimated to be 10 million units by the India Brand Equity Foundation. An additional 25 million units of affordable housing are required by 2030 to meet the growth in the country's urban population.
• The real estate industry has benefited from the push for policy that has resulted in legislation like the Real Estate Regulatory Authority (RERA), the introduction of Real Estate Investment Trusts (REITs), and housing initiatives like PMAY (Pradhan-Mantri Awas Yojana) and SWAMIH (Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects).
• In 2023, a target of 45,70,082 houses in the West Bengal state of India was allocated by the Ministry of Rural Development. Even though there is a big demand for housing in the country, residential launches have been on a comparatively high level over the past few years. In the financial year 2023-24, the total number of completed houses in urban areas of India under the Pradhan Mantri Awas Yojana (PMAY, The Prime Minister's Housing Plan) reached 1,58,37,128.
• Housing affordability in India was 3.3 in the financial year 2023, as compared to 3.2 in 2022, according to industry experts. As reported by the Reserve Bank of India, in the financial year 2022, banks in India advanced around INR 2 trillion (USD 24.44 billion) in housing loans, almost reaching pre-COVID levels. This reflected renewed homebuyer sentiment, as an increasing number of Indians have been investing in buying residential property, which continues to this day.

Source: https://www.mordorintelligence.com/industry-reports/real-estate-industry-in-india

Office Real Estate Witnessing Lucrative Growth

• The Indian office real estate market has driven the growth of the commercial real estate sector in the past decades. Once dominated by information technology, office spaces are being increasingly leased by other sectors such as BFSI (banking, financial services, and insurance), engineering, manufacturing, e-commerce, and co-working sectors. The sector has demonstrated consistently low vacancy and high absorption rates.
• The Indian city of Bengaluru was estimated to have the highest net absorption among grade-A office spaces in the Asia-Pacific region. In the first quarter of 2022, the central business district (CBD) was the most expensive area for renting office space in Bengaluru, with a rental rate of INR 144 (USD 1.76) per square foot per month, according to industry experts.
• Commercial real estate investments have increased as a result of the Real Estate Regulation & Development Act (RERA) and Real Estate Investment Trusts (REITs). REIT owns, manages, and funds income-producing real estate. Office properties have emerged as the most popular sector for investment among high-net-worth individuals (HNI) in India and international PE investors, who together represent the majority of all equity investments in Indian real estate. Investors of all stripes are drawn to this industry by the high rental rates and better profits. Smaller homes and larger families contributed to the country's increase in flex and co-working spaces.
• According to industry experts in the first quarter of 2022, the Bandra-Kurla complex was the most expensive area for renting office space in the Indian city of Mumbai, with a rental rate of around INR 276 (USD 3.36) per square foot per month. Navi Mumbai offered office space at the lowest rate of around INR 67 (USD 0.82) per square foot per month among all sub-markets of Mumbai. The average rent for Mumbai office market space was around INR 138(USD 1.68) per square foot per month.

India Real Estate Industry Overview

Source: https://www.mordorintelligence.com/industry-reports/real-estate-industry-in-india

Real estate investing can be a lucrative venture, but it requires careful planning and consideration. Here are some common ways to invest in real estate:

Direct Ownership

• Rental Properties: Buy a property and rent it out for income. This requires property management skills or hiring a property manager.
• House Flipping: Purchase undervalued properties, renovate them, and sell them for a profit. Requires renovation expertise and market knowledge.
• Wholesaling: Find properties at a discount, put them under contract, and then sell the contract to another investor for a fee.

Indirect Ownership

• Real Estate Investment Trusts (REITs): These are companies that own and operate income-generating real estate. You can invest in REITs like stocks.
• Real Estate Crowdfunding: Invest in real estate projects with other investors through online platforms.
• Real Estate Mutual Funds and ETFs: Invest in a portfolio of real estate-related securities.

Key Considerations

• Risk Tolerance: Direct ownership typically involves higher risk and more hands-on management compared to indirect ownership.
• Financial Resources: Real estate investments often require significant capital.
• Market Knowledge: Understanding local real estate markets is crucial for success.
• Time Commitment: Direct ownership demands more time for property management or renovation.
• Diversification: Consider diversifying your real estate investments across different property types and locations.

Additional Tips

• Education: Learn about real estate investing through books, courses, and online resources.
• Networking: Build relationships with other real estate investors and professionals.
• Due Diligence: Thoroughly research any property or investment opportunity before committing.
• Financial Planning: Create a budget and investment plan.
• Tax Implications: Understand the tax consequences of real estate investments.

Remember: Real estate investing is a long-term strategy. It's essential to have a clear investment goal and be prepared for market fluctuations.