The idea of earning money while you sleep may seem like a dream, but it is actually a reality. Many alternative sources of income, namely passive income, can help you earn money without doing much.
In recent years, the idea of passive income has gained significant traction among individuals in India. People are increasingly realizing the importance of diversifying their income streams and reducing their dependence on a single source of income.
According to a survey from Deloitte, about 62% of Indian Gen Zs and 51% of millennials have side hustles in addition to holding down a full-time job. Be it a desire to achieve financial stability, build wealth, or create more free time, the concept of passive income has captured the minds of many Indians looking to secure their future. Some ways of generating a passive income include setting up your own business, investing in real estate and earning through licenses or royalties.
If you’re wondering what the best passive income sources in India are and how to create multiple sources of income in India through real estate investments, we have you covered! Read on to find out more about how to maximise your returns through rental income, leasing and REITs!
What Is Active Income And Passive Income?
Active income refers to income that is earned through active participation in work or business activities. This typically includes wages, salaries, and income generated from self-employment or running a business. Active income requires regular effort, time, and direct involvement in order to generate earnings. It is directly tied to the amount of work or services provided by the individual.
Passive income is an alternative source of income that requires direct involvement to earn. It is money that flows into your bank account regularly, whether you're actively working or not. The beauty of passive income lies in its ability to provide financial stability and freedom by diversifying your income sources. A passive income continues to be earned even when an individual is not actively working. While passive income often requires an initial investment or effort to set up, it can provide a more consistent and residual stream of earnings.
The main difference between active income and passive income lies in the level of active involvement and ongoing effort required to generate earnings.
What Are The Passive Income Sources In India?
In India, there are various sources of income that individuals can explore to generate revenue and achieve financial stability. Understanding these sources can help individuals diversify their income streams and maximize their earning potential. The following are the seven primary sources of income in India:
- Rental Income
Rental income refers to the revenue earned by individuals who own or lease out properties, such as residential or commercial spaces, to tenants. This alternative source of income can provide a steady stream of passive income. Rental income includes the potential for long-term financial stability, property appreciation, and tax benefits. While traditionally, residential real estate has been the choice for most investors, commercial real estate provides better returns.
Additional read:Where to invest for high real estate returns in India 2023?
- Dividends and Investments
Dividends and investments involve earning income from shares, mutual funds, or other financial instruments. Individuals can invest in companies and receive dividends based on their ownership, or they can earn returns by investing in various financial markets. It offers an opportunity for wealth creation and generating passive income over time.
- Royalties and Licensing
Royalties and licensing are another source of income in India. Royalties are payments received by individuals or entities for the use of their intellectual property, such as patents, copyrights, or trademarks. Licensing involves granting permission to others to use a specific product, brand, or technology in exchange for royalty payments. This form of income allows creators and inventors to earn passive income by leveraging their intellectual property rights.
- Interest Income
When individuals lend their money to financial institutions or entities, they receive regular interest payments as compensation for the use of their funds. The interest rate is determined by factors such as the duration of the investment and prevailing market rates. Interest income provides a stable and predictable stream of passive income in India and can be an important component of a diversified investment portfolio.
- Capital Gains
Capital gains refer to the profits earned from the sale of assets such as real estate, stocks, bonds, or mutual funds. This source of income arises when the selling price of an asset exceeds its purchase price. Capital gains can provide a significant income boost, especially in the case of long-term investments.
Subscribe to our weekly newsletter
What could be more exciting than getting so much knowledge for free?
*Please enter a valid email.
What Are The Best Ways To Create Passive Income Sources In India In Real Estate?
Real estate is a popular investment avenue that offers the potential for passive income in India. By investing in real estate, individuals can earn regular income without active involvement in day-to-day operations. Real estate investments in India have the potential to generate a second source of income in India through rental properties, property appreciation, and various real estate investment opportunities. With a growing population and increasing urbanization, the demand for rental properties remains strong in many cities.
Real estate investments offer several advantages as a passive income source. These include stable and predictable income, potential tax advantages such as deductions and depreciation benefits, leverage through mortgage financing, and the ability to diversify investment portfolios. Moreover, real estate investments can provide a tangible asset that can appreciate over time. If you are wondering how to create multiple sources of income in India, here are some of the sources of passive income in India in real estate.
- Rental Properties
Investing in rental properties involves purchasing residential or commercial properties and leasing them out to tenants. Rental income provides a consistent stream of passive income. Pros include regular cash flow, potential property appreciation, and tax deductions. However, it requires property selection, tenant management, and property maintenance. Property location, rental demand, and market conditions are critical factors for success.
Additional read: Commercial properties for rent in Mumbai
- Real Estate Investment Trusts (REITs)
REITs are investment vehicles that allow individuals to invest in a portfolio of income-generating real estate properties. By investing in REITs, individuals can earn passive income through dividends distributed by the trust. The advantages of REITs include diversification, professional management, and liquidity. However, returns may be subject to market fluctuations, and investors rely on the performance of the underlying properties and management decisions.
Additional read: Why invest in REITs?
- Real Estate Crowdfunding
Real estate crowdfunding is a method of raising funds from a group of individuals to invest in real estate projects. It allows investors to pool their money together, typically through an online platform, to participate in real estate ventures and earn passive income through dividends or capital appreciation.
- Property Flipping and Wholesaling
Property flipping involves purchasing undervalued properties, renovating them, and selling them at a higher price. Wholesaling involves identifying distressed properties and assigning the purchase contract to another investor for a fee. These methods can generate significant profits in a short period. Property flipping and wholesaling require market expertise, negotiation skills, and the ability to manage renovation or wholesale operations.
- Vacation Rentals and Airbnb
Investing in vacation rentals or using platforms like Airbnb allows individuals to generate income by renting out their properties to short-term guests. This approach offers higher rental rates compared to traditional long-term rentals.
Tips for Success in Generating Passive Income in Real Estate
Building successful sources of passive income in India in real estate requires careful planning and strategic decision-making. Here are some valuable tips and strategies to consider: Set Clear Financial Goals
When it comes to generating passive income in real estate, it is essential to set clear financial goals. This involves defining your objectives and determining how much income you want to achieve, as well as the timeline in which you aim to achieve it. By having clear goals in mind, you can stay focused and make well-informed investment decisions that align with your desired outcomes.
- Research and Understand Different Active Income and Passive Income
Take the time to learn about rental properties, REITs, crowdfunding, and other options. Each source has its own set of benefits, risks, and potential returns. By gaining knowledge about the local real estate market, rental demand, and investment trends, you can make well-informed decisions and increase your chances of success.
- Diversify Investments
Diversification is key to reducing risk and maximizing returns. Instead of relying solely on one type of investment, consider diversifying your portfolio across different real estate income sources. This helps to mitigate the impact of market fluctuations and provides stability to your passive income stream.
- Manage Risk and Stay Informed
Real estate investments come with inherent risks. Stay informed about market trends, economic indicators, and regulatory changes that may affect your investments. Conduct thorough due diligence before investing, including property inspections, tenant screening, and financial analysis. Consider consulting with professionals such as real estate agents, attorneys, and financial advisors to mitigate risks.
- Create Passive Income Streams Aligned with Interests and Skills
You can choose passive income streams in real estate that align with your interests, skills, and resources. For example, if you enjoy renovation and have experience in property flipping, that might be a suitable option. By leveraging your interests and skills, you can enhance your chances of success and enjoyment in managing your alternative sources of income portfolio.
Conclusion
Generating a second source of income in India in real estate offers individuals in India the opportunity to build a sustainable and diversified income stream. You can check out propreturns and explore opportunities for real estate investments and on how to create multiple sources of income in India.
By taking proactive steps and exploring suitable passive income sources in India, readers can work towards financial independence and enjoy the benefits of long-term wealth creation.
If you want to earn returns through investments in real estate, check out our list of offerings at PropReturns. You can invest in preleased commercial property and income-generating commercial property.
