Real Estate Investment, Gold and stocks have been the most active investment option for any investor who want returns more than 8.6% PPF return or Fixed deposit return to become Crorepati. But you will hear a lot of apprehensions regarding equity or stock investments by people in India especially who don’t know the beauty of equity as a product. They have their own apprehensions
Apprehension I – I have deposited Rs 5 Lakh in my demat account and I am left with Rs 5000 after trading in equities on the advice of my broker
Apprehension II – I have invested Rs 2 Lakh in January 2008 when the markets were at all time high and I am still awaiting my purchase price
Because a lot of Indian people have problems with investment in equity, the other safer option left with them is of Investment in real estate or real estate investment. Property Investment advantages has been listed below
Investment in Real Estate Advantages
Real estate investment can be special investment option because you get
- Appreciation in the value of real estate Property
- Provides shelter
- Improves your standard and image in the society when you become the owner of some property
- Rental Income if not shelter
The value of land increases with the increase in the demand of that asset i.e property in this case. Although, real estate prices also corrects sometimes, but you will generally see a trend in the market where land is treated as an asset which never depreciates. Infact you can make your money grow 5 to 10 times in property in 10 years if you have chosen right property.
Very important point which needs to be discussed over here is the image which an individual is able to create in society by holding investment in real estate which may make him feel proud also in some cases especially in Tier 2 and 3 towns. It also provides shelter and if not shelter, you have the option to rent it out and get an opportunity to enjoy multiple benefits of capital appreciation and regular income in the form of rent from your tenants.
Real Time Example of Real Estate Investment
I personally met a person in Mumbai named Mr. Suresh Mongarkar, one of my clients, who is working for an infrastructure development company and use to earn around 1.25 Lakhs monthly after having 15 years of experience in the industry. He also said, he came to Mumbai some 15 years back and bought a flat at Andheri at 9 Lakhs at that point of time which he funded partly by home loan. Now today that property investment is worth Rs 1.25 Crores. An appreciation of around 15 times in 15 years. One important point to look here is looking at his current salary package of 1.25 Lakhs, and considering his monthly savings to be of Rs 75000 (Rs 50000 being the monthly expenditure), still he won’t be able to save that much in the next 15 years which he was able to do in just 8 Lakhs of investment. This is nothing but magic of compounding which works well in real estate investing.
How to fund Real Estate Investment
In present scenario people easily get loans of 10 to 15 Lakhs rupees because their median income is 500,000 per year. It is a wonderful scenario which would help you to get investment of your dreams. You can apply for home loan by making an upfront payment which would easily get you an apartment in your vicinity. It is one of the safest investments in India which offers you good returns.
Major factors for Property rise
Growth of Middle Class:
In recent times there has been a stupendous growth in number of people who belong to middle class category. It has raised the demand manifold and makes property investments a mouth watering prospect for the user. Due to huge population growth in urban center people migrated to suburbs which resulted in a great rise in property. There are times when values are speculated but generally they do a course correction. In case of India any reduction in cost of real estate is temporary because big cities like Delhi or Mumbai have seen a huge price rise and there is no looking because of middle class population which is growing at a faster rate
Increase in Purchasing Power and Construction Activities:
It is a known fact that Bangalore and Gurgaon have seen their price spiral upward in recent times. Builders also provide comfortable dwellings to consumers to extract maximum price. There are people in rich and middle class who are willing to pay the price and their population is increasing.
Compounded rate of growth increases the net worth of an asset
An Example: If you invest money to buy an apartment in Bangalore for 30 lakhs you can easily earn an income of 1 crore after 4 years. Generally houses in big metros provide 300% increase in 4 years which is a wonderful investment. You must be careful when you are investing in buying an apartment or a house because it should be near the highway or a shopping mall so that you would get a good rate of interest if you are willing to sell. Below is the table that shows how the initial price of a property worth 20 lakhs increases in 5 years at a constant rate of 20% interest
Below is the chart that would provide a glimpse of the overall increase
| Property Price | Year |
| 20,00,000 | 1 |
| 24,00,000 | 2 |
| 28,80,000 | 3 |
| 34,56,000 | 4 |
| 41,47,200 | 5 |
From above you can see that even at a modest rate of interest the final value of property has become the double of initial value.
Increase in average land price across India:
Generally there has been a stupendous growth in recent times across India. It is reflected in property prices as well. Below is the data that shows an increase in rate of property from previous year to this year
| Month Year | Property Index
|
| Jan 2010 | 1080
|
| Feb 2010 | 1108 |
| March 2010 | 1117 |
| April 2010 | 1095 |
| May 2010 | 1144 |
| June 2010 | 1122 |
| July 2010 | 1107 |
| Aug 2010 | 1190 |
| Sep 2010 | 1175 |
| Oct 2010 | 1170 |
| Nov 2010 | 1229 |
| Dec 2010 | 1230 |
| Jan 2011 | 1260 |
It is calculated that even in middle tier cities that have a population of about 1,000,000 people there has been witnessed a general growth in property because companies in modern times have started expanding operations in these places. It has resulted in an optimistic scenario where in you need to invest your money and it will automatically work for you.
Do share your Comments: Do let us know if you have some live example of tremendous growth in your real estate investment
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