When it comes to the real estate industry in India, most people are confused regarding whether it is a good investment option or not. But if you ask us, real estate is definitely an excellent investment option as it can generate ongoing passive income and can be a perfect long-term investment if the value increases over time. You might even use your real estate investment as a part of your overall strategy to start building wealth.
Also, diversifying your investment portfolio is important. In case you put all your eggs in one basket, you can suffer a total loss in the blink of an eye. But when you invest some funds in the stock market and other funds in real estate or ETFs, you undoubtedly increase your chances of higher earnings and lesser losses.
Some people in India avoid real estate investment because the real estate sector is scary and will need many funds to invest. But fortunately, neither is accurate and to reassure you, we have got you covered with 6 amazing reasons why real estate is a good investment option in India.
Top 6 Reasons Why Real Estate Is an Excellent Investment
If you are wondering about investing in the real estate market, you are about to embark on one of the lucrative investment opportunities of your lifetime. Here are the top reasons why you should consider investing in real estate, even if you have never invested before.
1. You will get tax benefits
Real estate investors can take utmost advantage of multiple tax write-offs like every other business owner. But, while it is an investment when you own a house and rent it out to tenants, you run a business as if you are the landlord. As a business owner, you can write off the expenses that involve mortgage interest paid on the loan, origination points paid on the loan, maintenance expenses, depreciation, real estate taxes, HOA dues, etc.
Remember to talk to your tax advisor before assuming you can write expenses off, but know that investing in real estate in India is beneficial. In the case of bonds or stocks, you can only write off any capital losses only if you sell the asset for less than you paid for it.
2. You can force appreciation
Unlike bonds or stocks, you can force property prices to appreciate. Although it sounds pretty weird, it’s actually possible. First, know that real estate appreciates naturally. On average, property appreciates 3-5% a year without you doing anything except maintaining the house. But, you can increase the rate of appreciation by making repairs and renovations. One thing to note here is that not all repairs and renovations increase a home’s value. So, if you are making renovations to increase their value, work with a real estate agent to find out the best repairs you should make. You won’t get an incredible return on investments, but some renovations can pay you back as much as 80-90% of the money invested.
3. You can earn regular cash flow
Another reason real estate is a good investment is that you can earn regular cash flow. If you buy or hold a property, you can earn monthly cash flow renting it out, which increases the profits from owning real estate since you are not relying on appreciation but on monthly rental income. Of course, there is always a risk of tenants vacating the house early, but there’s a risk associated with every investment. Without risk, there can’t be a reward.
4. You can leverage your investment
There are not too many other investment options that allow you to invest in assets worth much more than you have to invest. For example, if you have Rs.1 lac to invest in the stock market, you can just buy Rs. 1 lac worth of stock. You can put down a fraction of the home’s cost and invest in it with real estate. For example, if you have found a house for Rs. 5 lac, if you put down Rs. 1 lac, chances are you can find a loan to finance the rest as long as you have a stable income and good credit score.
This means that you invest just a per cent of the asset’s value and own it. Then, over the years, as you pay the mortgage down, you will hold more of the investment, increasing your rate of return. This rate of return increases not only by paying the mortgage down but also by the natural appreciation of real estate.
5. You can pass real estate down to your heirs
If you wish to leave a legacy behind but don’t think going with cash is a good idea, passing the real estate down can be much better. Not only will you give your heirs an income-generating asset, but it is also an appreciating asset. So, they can either keep the real estate and let the legacy continue or sell it and earn significant profits.
6. You might feel financially secure
There is not much to feel sure about when you invest in the market. But as the pandemic showed, it can change in the blink of an eye. One minute you have considerable investment, and the next minute, you have lost everything. When you invest in real estate for the long term, you know you have an appreciating asset. It might go through ups and downs, but the real estate market usually bounces back if you hold onto it long enough. Also, many people invest in real estate to supplement their retirement income.
Moreover, some people feel secure knowing that their money is invested in a safe investment rather than liquidating it in a cash account or investing in bonds or stocks.
To conclude, investing in real estate requires a great number of financial resources, which makes it critical to take extra measures to ensure a maximum profit on your investment. The diverse nature and unique difficulties of the real estate market, if well planned for, can lead to lucrative returns to any prospective investor either through capital appreciation, equity build-up, or net operating income.
So, make up your mind and start investing in the real estate market today. Also, we at Clicbrics can help you make the right investment by offering a handful of great real estate investment options for you! Go and check out the property listings now!
[Also Read: Investing in real estate young - common mistakes and how to avoid them]