There are several benefits to investing in real estate. Consistent income flow, strong yields, tax benefits, diversification with well-chosen assets, and the ability to leverage wealth through real estate are all advantages that investors may enjoy. Here, we delve into the various advantages of investing in real estate in India.
The real estate sector in India is the second largest employer after the agriculture sector. India’s real estate industry is predicted to grow from US$ 200 billion in 2021 to US$ 1 trillion in 2030. It will make up 13% of the nation’s GDP by 2025 .
The development of nuclear families, increased urbanisation, and rising family income are projected to continue to be the fundamental forces behind the expansion in all real estate sectors, including residential, commercial, and retail. Due to its high return on investment (ROI) value, the Indian real estate market is flourishing and has been included in several successful investment portfolios. A report indicates that 77% of the average Indian household’s assets are made up of real estate.
In comparison to the previous ten years, the first half of the financial year 2022–23 had the biggest sales in India’s top 7 prime residential marketplaces, according to an industry report. The government’s supportive affordable housing programmes and rising homeownership awareness have caused the affordable housing market to expand significantly.
People’s realisation of the advantages of homeownership when compared to renting has contributed to the segment’s sustained expansion. The industry has experienced significant expansion as a result of rising earning potential, a demand for a higher quality of living, a growing base of aspirational customers, and their changing lifestyles.
Table of Contents
Top 7 Advantages of Investing in Real Estate in India
Over the long and short terms, more non-resident Indian (NRI) investment is expected in this sector. Bengaluru is anticipated to be the city that NRIs invest in the most, followed by Ahmedabad, Pune, Chennai, Delhi, and Hyderabad.
Here are a few reasons why investing in real estate in India is lucrative:
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Rental Income Potential
Profits from property-dependent businesses, rental income, and appreciation are the main sources of revenue for real estate investors. Real estate tends to appreciate in value over time, so if you make a smart investment, you can profit when it comes time to sell. Over time, rents also tend to increase, which might increase cash flow.
Rents increase when economies expand because there is more demand for real estate, which raises capital values. By shifting some of the inflationary pressure to renters and integrating some of it through capital growth, real estate has a propensity to maintain the buying power of capital.
One of the most attractive sources of passive income is rental revenue. One of the easiest methods to maintain a steady income after retirement is to do this. If you are still working, you may maximise your rental income by investing it following your financial objectives.
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Tax Benefits and Incentives
There are various tax benefits to real estate investing. Under section 80C, one can save up to Rs 1.5 lakh on the principle of a home loan. In a similar vein, section 24 permits a decrease in the required interest payment of up to Rs 2 lakhs.
It will dramatically reduce taxable income while lowering the cost of real estate investing.
Tax deductions are provided for a variety of costs, such as company expenses, cash flow from other assets, and mortgage interest.
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Diversification and Risk Management
Diversification is a choice when investing in real estate. Real estate’s link to the other main asset groups is fragile, at times even negative. Real estate may therefore reduce volatility and boost return on risk when it is included in a portfolio of various assets.
Compared to other assets like the stock market, gold, cryptocurrencies, and banks, investing in real estate can be significantly safer. Gold prices may help to moderate market volatility, but they also come with other annoyances, such as storage and theft issues. The stock market is continuously changing.
The real estate industry has grown over the past several years as a result of the implementation of RERA, decreased home loan interest rates, and other factors. The interest rates on bank savings accounts, on the other hand, are low, especially when compared to the rising inflation.
Many investors view property ownership as an appropriate inflation hedge since real estate investments are highly recognised for their safety and security. Property price growth and yearly rental return have historically surpassed inflation.
Among the many benefits of real estate ownership, its ability to generate a steady return on investment makes it a favoured choice for financial planning.
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Long-Term Value Appreciation
The most important factor to take into account when weighing the benefits and drawbacks of a real estate investment is property appreciation.
The value of a property rises when market rates rise, enabling the owner to sell the home quickly. With the right upkeep and management, you may create a consistent rental income even if a property’s value stays flat for a while. All investors should thus do their homework before committing to a purchase in a certain area.
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Return on Investment
A REIT can be profitable in two different ways: First, REITs regularly pay dividends to investors. Secondly, profit from the sale of an investment if the REIT’s value rises.
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Financing and Leverage
Real estate may benefit from a variety of revenue streams and experience capital growth since it is a physical asset. Real estate gives permanent stability as its value never decreases, in contrast to other assets like stocks that have little to no actual worth.
Real estate is easy to acquire, finance, and improve your lifestyle while providing tax benefits. There aren’t any overwhelming financial obstacles either.
Leverage, or the ability to put down a little amount of one’s own cash and borrow the rest to buy a property, is a key benefit of real estate investing.
Investing in high-quality real estate for as little as 15% of the entire cost, putting down a down payment from savings, and getting a mortgage to pay the remaining amount. It implies that even with a small investment, one may still become the owner of the property. It also ensures that a person will only invest a portion of their earnings in real estate.
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Emerging Trends and Opportunities
Due to the increased use of technology and the need for more comfort and convenience in daily life, there has been a steady rise in the demand for smart homes in India over the past few years. To appeal to clients that are tech-aware, developers are realising how important it is to include technology and smart devices in their projects.
In India, many brand-new housing developments are being created especially as smart houses, complete with amenities like centralised control systems, voice-activated assistants, smart lighting, and automated security systems. The increased convenience, comfort, and security that these houses provide to their occupants are increasingly important to buyers of homes in the present market.
Homes with solar panels, rainwater collection systems, and energy-efficient appliances should become more common in 2023. To lessen the negative effects of housing developments on the environment, developers are also urged to concentrate on employing eco-friendly materials in construction.
It’s crucial to remember that India is only just beginning to adopt smart homes, and the industry is still developing. As a result, smart houses could only be offered in a few locations or projects, and their installation and maintenance costs might be greater than those of conventional homes.
Final Thoughts
The residential market is expected to grow significantly. As additional infrastructure is projected in urban regions, such as urban residential zones in Pune, Bangalore, Delhi, etc., the need for commercial and retail office space would increase.
Additionally, it can offer a steady income, portfolio stability, and relatively low-risk leverage. Real estate has the potential to provide significant long-term rewards. It provides a steady cash flow and has several tax benefits.
Rental income is exempt from self-employment taxes. The government also provides tax discounts for mortgage interest, insurance, maintenance and repair costs, and property depreciation. In exchange for their long-term investments, real estate investors receive lower tax rates.
Also Read,
Real Estate Market in India: 2023 and Beyond
10 Best Cities for Real Estate Investment in India
Joint Tenancy in Property Ownership: All You Need to Know!
FAQ’s
1. What are the benefits of investing in real estate in India?
The advantages of real estate investment in India include long-term capital growth, rental income, and tax advantages. Compared to other investment possibilities, real estate investments are also generally steady, giving investors a sense of confidence.
2. Is it beneficial to invest in real estate?
In India, purchasing real estate is a secure kind of investment. Compared to other assets like the stock market, gold, cryptocurrencies, and even banks, investing in real estate can be far safer. The stock market is always changing, hence making it quite risky.
3. Is buying a property a good investment in India?
Compared to other business investment alternatives like shares and mutual funds, real estate investing in India has a lower volatility quotient. Since it is a physical asset, it continues to be among the safest investment options in India.
4. Is real estate better than stocks in India?
While stocks appear to be an unpredictable and volatile kind of investment illustrated by market volatility, real estate offers long-term security and large profits. Real estate investing offers substantial returns on investment and is a far more reliable and steadier source of income.
5. What are the advantages of real assets?
Real assets are a crucial part of investment portfolios because they can increase in value, provide consistent cash flow, diversify the portfolio, and act as an inflation hedge. A low connection between real assets and conventional financial assets might lower the risk of the entire portfolio.
6. How do you benefit from real estate investment?
Real estate investments offer stability to the portfolio, a reliable source of income, and relatively low-risk leverage.
7. What are the benefits of investment?
A good way to manage your finances and even grow your wealth is through investing. If you make smart investing choices, your money may increase in value and outpace inflation. The key factors influencing investment's larger growth potential are the power of compounding and the trade-off between risk and return.
8. What are the 4 types of real estate?
Land, Residential, Commercial, and Industrial are the four types of real estate.
9. Which type of real estate is best?
Commercial real estate is often recognised as a better investment option. Depending on your location, managing a business property might eventually pay off if you can afford it. However, residential real estate comes close to commercial real estate.
10. What is the return of real estate investment in India?
The average property price went from Rs. 5,826 per square foot in 2021 to Rs. 6,150 per square foot in 2022, a maximum annual increase of 6%.
11. What is the meaning of real estate investment?
The practice of buying real estate as an investment rather than a permanent residence to make money is known as real estate investing. It may be simply described as any piece of land, building, infrastructure, or other tangible assets that can be transferred for a profit even if it is frequently immovable.
