Whether you're intrigued about real estate's prospect for investment or you're tired of advertisements offering little-known ways to "profit from your property," it's worth learning, for real, how real estate returns in India build capital.
Rather than offering arcane real estate investment ideas or a primer on homeownership for first-time purchasers, this article will concentrate on how to generate money from real estate. It will cover both the elemental methods that haven't changed in centuries, no matter what type of gloss the current gurus try to put on them, and unique possibilities appearing recently.
Overview of Real Estate Returns in India
Real estate returns in India have experienced mixed trends in recent years. While some regions and property types have shown significant appreciation, others have witnessed gradual growth. Driven by increased urbanization and housing demand, the residential segment has been performing well. alongside, commercial real estate is showing promises— particularly in prime locations and emerging business hubs.
In recent times, returns from commercial real estate in India have shot up considerably. Investing in segments such as pre-leased commercial property, fractional real estate and REITs have given investors considerable returns.
Ways to Earn Profits Using Real Estate Investments
Making money in real estate or lucrative investing necessitates outstanding guidance, strategies, and perseverance. While real estate investing is a tried and true way to make money, it, like every other business, has inherent risks.
However, if you're willing to invest the time to educate yourself about the process and the best tactics for maximizing profits, real estate is an incredible vehicle for building up your wealth.
Here are a few ways to earn profits using real estate investments:
- Capital Gains on Selling a Property
Residential Properties: Buying residential properties and selling them at a higher price when their value appreciates over time is an incredible way of earning profits by investing in real estate.
Commercial Properties: Investing in commercial properties, like office buildings or retail spaces, and selling them at a profit when their market value increases. You can invest in a range of commercial properties at PropReturns.
Land: Purchasing undeveloped land and selling it as its value appreciates due to factors like infrastructure development or changes in zoning regulations generate great capital gains.
- Rental Yield
Residential Properties: Buying residential properties, like apartments or houses, and renting them out to tenants generates rental income and potential appreciation over time.
Pre-leased Commercial Properties: Investing in already leased commercial properties where tenants are in place— provides a ready rental income stream and reduces the risk of vacancy.
- Modern Real Estate Investment Options Exploring modern investment options like Real Estate Investment Trusts (REITs) or crowdfunding platforms that allow individuals to invest in real estate portfolios managed by professionals.
REITs: REITs, or Real Estate Investment Trusts, are investment vehicles that allow individuals to invest in real estate without directly owning properties.
MBSs, MICs, and REIGs: MBSs, or Mortgage-Backed Securities, are financial instruments that represent an ownership interest in a pool of mortgage loans. MICs, or Mortgage Investment Corporations, are Canadian investment vehicles that pool funds from individual investors to lend money for mortgages. REIGs, or Real Estate Investment Groups, are investment structures where multiple individuals come together to invest in real estate properties as a group.
Fractional Ownership: Fractional ownership refers to a type of ownership structure where multiple individuals or entities collectively own a specific asset or property. Each owner holds a fractional share or percentage of the asset, which grants them the corresponding rights and benefits.
Real Estate Alternative Investments: Real estate alternative investments refer to non-traditional or unconventional investment opportunities within the real estate sector. These investments often offer different structures, strategies, or asset classes compared to traditional direct ownership of physical properties.
Recent Trends of Each Investment Type
The cost of real estate and rental yields have risen dramatically in seven major cities (Delhi NCR, Mumbai Metropolitan Region (MMR), Kolkata, Pune, Chennai, Hyderabad, and Bengaluru) during the last five years.
In the last five years, standard property prices in Bengaluru and Hyderabad have risen by up to 10%. From Rs. 5,826 per square foot to Rs. 6,150 per square foot in 2022, there was a yearly increase of 6% in the average real estate price.
On the other hand, Nexus Select Trust, backed by global investment giant Blackstone, intends to raise up to Rs 3,200 crore in India's first retail REIT public offering. The overall size of the public offering is Rs. 3200 crore, including an additional issue of up to Rs. 1800 crore. Nexus Select Trust manages 17 operational shopping centers in 14 major cities, comprising 9.8 million square feet.
If we see, all the factors that fuel rental yields and capital appreciation are in place— the earning potential for both investment rationales remains optimistic.
Continuing this, let’s understand the factors to consider while investing in real estate.
Factors to Consider While Investing in Real Estate
Location: The location of the property plays a crucial role in its long-term success. Look for areas with strong economic growth, good infrastructure, access to amenities, and potential for future development.
Market Conditions: Evaluate the current real estate market conditions, including supply and demand dynamics, price trends, and rental vacancy rates. A favorable market can provide better opportunities for returns on investment.
Financial Analysis: Conduct a thorough financial analysis, including assessing the property's potential cash flow, expenses (such as property taxes, maintenance, and insurance), financing options, and potential returns. Calculate metrics like cap rate, cash-on-cash return, and return on investment (ROI).
Risk Assessment: Consider the risks associated with the investment, such as market volatility, regulatory changes, potential vacancies, and property-specific risks. Evaluate your risk tolerance and determine appropriate risk mitigation strategies.
Considering these factors, allows you to make informed investment decisions, minimize risks, and maximize the potential for profitable real estate investments. You can check out the detailed blog here.
Conclusion
Pune, Bangalore, Delhi NCR, Navi Mumbai, Daman, Shimla, Kolkata, Chennai, and Hyderabad are a few best locations if you’re looking forward to investing in real estate. However, it’s crucial to consider the factors mentioned before you jump on to investing in real estate as despite the potential for high returns, investing in property can be a bit risky.
