It’s tangible, it’s solid, it’s beautiful. It’s artistic, from my standpoint, and I just love real estate says Donald Trump (the US presidential candidate)
Investing in Indian Real Estate has become a rewarding proposition; transactions have become hassle-free, tensions are less, tax provisions are simple, options are available to save tax and finally for the NRI repatriation is easy and simple.
The problem with real estate is that it’s local. You have to understand the local market. says Robert Kiyosaki (the author of the book Rich Dad Poor Dad)
Know your market well. If you pay market price for an investment property, you probably won’t see particularly robust returns. It will make a market return, and if you want to do better than that, you have to pound the pavement. Look for deals that are under-priced for one reason or another and to know which deals are under-priced; you have to do your market research.
The High inventory means great discounts
Every city in India presently has an inventory of empty houses. For example Bangalore for the last quarter has more than 80000 empty units. Builders with deep pockets are holding their ground but others are buckling. Discounts are on the cards. Take for example Ajnara Builders Jackpot 777 offer. For more details http://www.ajnara.co.in With a good property advisory you can get even better discounts.
Real Estate is a Great Long-Term Investment
Regardless of the current scenario, real estate is still a good, long-term investment. If you analyse the last 30 years of data, real estate is valued much higher than it was. And if you have tenants paying your loan amount, it’s an icing on the cake.
Rented properties are good source of income, but if you have little experience in the game, it is advisable to engage an agency with the local knowledge and expertise to handle the transaction and day-to-day management.
Rental value increases with the change of tenant or the renewal of the lease agreement. Real estate income tends to increase faster in inflationary environments, allowing an investor to maintain its real returns.
There is a flip side also unlike other asset classes, real estate is cyclical. Real estate has two cycles: the Rental market cycle and the investment market cycle.
Rental Market Cycle
The leasing market consists of the market for space in real estate properties. As with most markets, conditions of the rental market are also dictated by the supply and the demand. For example rentals in Noida sector 76 will be lower than Noida sector 50 which is just across the road. Even one can expect rental corrections due to construction of newer dwellings in nearby areas.
Investment Market Cycle
The real estate investment market moves in a different cycle than the leasing market. On the demand side of the investment market are investors who have capital to invest in real estate. The supply side consists of properties that are brought to market by builders/owners. If the supply of capital seeking real estate investments is plentiful, then property prices increases. As prices increase, additional properties are brought to market to meet demand.
The Non-Resident Indian (NRI) can make investment in a residential property or in a commercial property with the objective of receiving a regular flow of rental income. The provisions of taxing rental income are simple, easy and investor friendly.
For calculating the taxable income from rental income, actual payment of house tax is deducted. Besides a special 30% deduction of the rental income is done towards repairs (whether you spend or not), maintenance and collection charges of the property. The benefit is, remaining rental income is the taxable income.
Another important taxation benefit is the complete deduction of the interest paid by the Non-Resident Indian (NRI) for purchase of property thru housing loan. This means the entire interest payment to the bank for rented property is allowed as a deduction from the rental income.
A word of caution
Investing in a property in the pre-launch stage is highly risky. Since such projects are still on the drawing board, their final specifications can change drastically.
In a nutshell…
If you decide to invest, meet with a trusted local real estate agent who can help you navigate the ever changing landscape of the real estate market. They often know when properties are about to go on sale and may have a lead on distress sale properties that can be a great buy.
Happy house hunting! Will you be investing in real estate in the near future?