Monday, 1 June 2015

Why Real Estate Investment?

Real estate investing involves purchase, ownership, management, rental and/or sale of real estate for profit. Stocks, bonds, mutual funds, investments, and real estate - though the list seems to be endless, making a choice is still considered to be a tough task. Given below are some of the reasons as to why real estate industry is believed to be the king of investment.
  • Inflation Hedging: When the economies grow and expand, the demand for the real estate industry consequently increases along with the increase in rentals and that translates into higher capital land prices. India, being a developing country, requires less amount of investment but much greater returns.
  • The Positive Cash Flow: It is the real estate industry that generally gives you huge investment options wherein you could receive a guaranteed and tangible income throughout the year. This is what exactly a positive cash flow is.
  • Scope of appreciation: Capital appreciation is the increase in market value of the asset over time, realized as a cash flow when the property is sold. The real estate industry is generally considered to be one of the safest options in a long term perspective. Industry Experts in the realm of real estate industry agree that in a period of ten years the real estate industry has seen the highest scale of appreciation in comparison to any other class of investment. As communities grow, so does the value of your property. History has shown that real estate prices have continued to steadily increase over the years. The longer you hold onto your investment property, the more potential you have to get a high return.
  • The Tax Benefits: Real estate sector is one of the major contributors to the country’s GDP. And since the government wants to promote affordable housing and housing for all, the investments in real estate are bound to give you tangible tax benefits of as much as INR 1,00,000 in the upcoming year.
  • Leverage: Leverage here in simple terms or in terms of the real estate industry would mean the ability to use the borrowed capital in order to ensure a potential return on investment. Real estate industry is the only possibility among various investment classes that allows for leverage. For example by paying a minimum of 20% cost of the property, you as the owner could control the income from the property. The remaining 80% can be availed from banks in the form of home loans.
  • Diversification in the investment portfolios: Having a diverse investment portfolio would only help you in diminishing the risks and increasing the returns on investment. Assets which are not co – related to each other in the same portfolio would decrease risks.
Real estate is a distinct asset class that is simple to understand and can enhance the risk and return profile of an investor's portfolio. On its own, real estate offers competitive risk-adjusted returns, with less principal-agent conflict and attractive income streams.

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