A Guide to Investments in Indian Real Estate


Property has traditionally been a route for appreciable investment per se and investment chance for High Net-worth Individuals, Financial institutions in addition to individuals looking at viable alternatives for investing money among stocks, bullion, land and other paths.

Money invested in property for its earnings and capital expansion offers predictable and stable earnings yields, similar to that of bonds offering both a normal return on investment, even if property is leased in addition to potential of capital appreciation. Like the rest of the investment choices, real estate investing also has certain dangers attached to it, which is rather different from other investments.

Investment scenario in real estate

Any investor before considering real estate investments should think about the danger involved with it. This investment option demands a high entry price, suffers from shortage of bandwidth and an uncertain gestation period. To being illiquid, an individual cannot sell some units of his house (as you could have achieved by selling some units of equities, debts or even mutual funds) in case of urgent need of capital.

The maturity period of property investment is unclear. Investor also has to look at the clear property name, particularly for the investments in India. The business experts in this regard assert that property investment should be achieved by persons who have deeper pockets and longer-term view of the investments. From a long-term fiscal returns perspective, it’s advisable to put money into higher-grade commercial properties.

The returns from real estate market are similar to that of certain equities and index funds in longer term. Any investor searching for balancing his portfolio can now examine the real estate sector as a secure way of investment with a specific degree of volatility and risk. A ideal tenant, place, segmental categories of the Indian property market and personal risk preferences will hence forth prove to be key indicators in achieving the target returns from investments.

The proposed introduction of REMF (Real Estate Mutual Funds) and REIT (Real Estate Investment Trust) will boost these property investments in the small investors’ standpoint. This will also enable modest investors to get into the housing market with contribution as less INR 10,000.

There is also a need and need from various market players of their property segment to slowly relax certain criteria for FDI in this sector. These foreign investments would then mean higher standards of excellent infrastructure and hence will alter the whole market situation concerning professionalism and competition of players.

Overall, property is expected to supply a fantastic investment alternative to stocks and bonds over the next few years. This attractiveness of real estate investment would be further enhanced on account of favourable inflation and low interest rate regime.

Looking forward, it is possible that with the progress involving the potential opening of the real estate mutual funds industry and the participation of financial institutions into property investment business, it is going to pave the way for more coordinated investment property in India, which would be an apt way for investors to obtain an alternative to invest in property portfolios at marginal amount.

Investor’s Profile

While the institutions traditionally demonstrate a preference to commercial investment, the high net-worth individuals show interest in investing in residential in addition to commercial properties.

There is a clear bias towards investing in residential properties than commercial properties from the NRIs, the truth could be concluded as emotional attachment and future security sought by the NRIs. As the essential formalities and documentation for buying immovable properties Aside from farm and agricultural properties are quite simple and the rental income is freely repatriable outside India, NRIs have increased their role as investors in real estate

Foreign direct investments (FDIs) in Ritz Carlton residences Bal Harbour form a small portion of the total investments as there are restrictions for example a minimum lock in period of three years, a minimum size of property to be developed and conditional exit. Aside from the conditions, the foreign investor might need to deal with numerous government departments and interpret many complicated laws/bylaws.

The Notion of Real Estate Investment Trust (REIT) is based on the verge of introduction in India. But like most other publication financial instruments, there will be issues for this new notion to be taken.

Real Estate Investment Trust (REIT) will be organised as a company dedicated to owning and, generally, operating income-producing real estate, such as apartments, shopping centers, warehouses and offices.

REITs are pass-through entities or companies who are able to distribute the majority of income flows for investors, without taxation, at the corporate level. The most important purpose of REITs would be to maneuver the profits to the investors in as intact manner as possible. Thus initially, the REIT’s business actions would generally be limited to creation of land rental income.

The part of the buyer is instrumental in situations where the interest of the seller and the buyer do not match. For example, if the vendor is eager to market the property and the recognized occupier intends to rent the property, involving them, the bargain will never be fructified; however, an investor can have competitive yields by buying the property and renting it out to the occupier.