Why Invest in Real Estate? With limited availability of land, increasing...
With limited availability of land, increasing population and people migration from one city to another, realty investment has an upside potential. Moreover, the government’s push for affordable housing, tax rebates and subsidies offered, as well as lower rate of interest offered by banks, makes real estate an attractive investment. One can benefit by real estate investment in multiple ways. You will earn rental yield and also its value will appreciate with time and development of location.
With limited availability of land, increasing population and people migration from one city to another, realty investment has an upside potential. Moreover, the government’s push for affordable housing, tax rebates and subsidies offered, as well as lower rate of interest offered by banks, makes real estate an attractive investment. One can benefit by real estate investment in multiple ways. You will earn rental yield and also its value will appreciate with time and development of location.
Compared other investment assets, real estate is less volatile since it is not traded. A study undertaken by Jordà-Schularick-Taylor Macrohistory Database funded by the Institute for New Economic Thinking (INET) asserts that ‘residential real estate, not equity, has been the best long- run investment over the course of modern history’. Additionally, with the rate of interest on home loans being lowest ever in the past 15 years, now is good time to invest in real estate.
You are also likely to get a good deal on the property, since with a bid to give momentum to the market, many developers have come up with attractive schemes and deals. For instance, considering consumer feedback that the key impediments to home ownership are high upfront down payment and paying both rent and EMI together, Lodha Group has launched ‘Apna Ghar, Apna Desh’ initiative. It offers the option of a very low down payment, low interest rates of 5.99% on EMIs and ready-to-move-in homes where one does not pay rent and pre-EMI at the same time.
Currently, the net rental yields in Mumbai, Bengaluru and National Capital Region (NCR) are around 2- 3% per cent, according to 2019 Knight Frank and Khaitan & Co report. With the national average of 3% percent, the rental yields in India are higher than in Beijing, Singapore and Hong Kong. Generally, investing in affordable to mid-segment properties will bring you higher rental yields, provided external factors like location, reputation of the builder, infra development are aligned.
Additionally, with the government drafting a new rental law, interests of investors will be protected with the rules and regulations in the rental segment streamlined. Also, there are a couple of tax benefits while calculating tax on rental income.
Real estate investments have a lot of tax benefits attached to it including section 80 C where you can claim benefits on paying the principal amount of the home loan, section 24, where you can claim tax benefits on the interest on the home loan that you pay for. Also, first time home buyers can claim a tax deduction on interest paid under section 80EEA. However, this facility is for investing in a property in the affordable housing segment whose value is Rs 45 lakh or lesser and other conditions need to be fulfilled.
Do a thorough homework on the location, configuration, the returns expected of the investment, the rental yield and then zero in on the project. Do check on the upcoming locations as they may be less expensive to purchase presently and may give you good returns in future. Ensure you enter into real estate transaction with a reputed RERA certified branded developer.
Difficult diversification: Unlike mutual funds, diversification is difficult in case of physical real estate.
Yes, NRIs can invest in Indian real estate, subject to certain guidelines and regulations.
NRIs are permitted to buy residential or commercial properties in India. However, they are not allowed to own agricultural land or farmhouses in India.
The best investment for NRIs depends on their financial goals and risk appetite, but real estate is commonly considered a potential option.
If an NRI purchases an immovable property in India from a resident, he must deduct 1% TDS if the purchase price exceeds Rs 50 lakh. TDS should be deducted at 20% if an NRI purchases a property from a non-resident and long-term capital gains (LTCG) are applicable. In case short-term capital gains are applicable, TDS at 30% should be deducted.
Yes, if you sell a property in India as an NRI, the buyer deducts 20% as Long Term Capital Gains Tax (LTCGT) or properties sold after two years. For homes sold during the first two years, the TDS rate is 30%, which is deducted as Short Term Capital Gains Tax.
