Why is real estate considered one of the safest options?
Real estate in India is the second largest employer after agriculture and is set to grow even more in the coming time. Owing to the increasing population and the limited supply of land, the demand for land is increasing and this is leading to higher returns from real estate market in the long term. The thought of investing in real estate is a prudent one and also gives the joy and satisfaction of owning a property. It is one of the easiest places to invest with no specific need for technical knowledge. Here are some of the reasons why real estate is one of the best places to invest your money:
Leveraging your investment
Real estate investment always gives the benefit of leverage. This is because it allows you to use borrowed capital to increase the returns of investment. We can use property loan as an instrument that reduces the amount of capital required to purchase a property. Whenever we buy a property, we just put a fraction of the cost from our pocket and actually end up investing in an asset which is way more than what we have. And while we are on our way to pay up the loan over the years, we start enjoying the appreciation in the property.
Tangibility
Satisfaction of actually seeing and feeling your asset is unmatched. Real estate is the only option of investment that gives the benefit of tangibility. It is an appreciating asset. It may go through crests and troughs and lose some value at times but when held on to for a longer period, it only earns for you. The joy of owning a property keeps you satisfied and gives you the sense of security.
Benefits of taxation
Owning a property not only gives happiness and satisfaction but also allows us to enjoy multiple tax benefits and exemptions. Under Section 80C of the Income Tax Act 1961, we can claim tax benefits on the repayment of the principal amount of the home loan, whereas Section 24 allows us to claim exemptions on the interest we pay on home loans. We can also claim capital gains on income taxes. Depreciation expense is typically the largest tax deduction available to real estate investors for commercial buildings and can help improve their cash flow by reducing their tax liabilities.
Maintaining regular cash flow
One of the biggest benefits that real estate offers is the certainty of rental income that the property can yield. Unlike other investments, especially the ones related to the stock market where returns are at the mercy of the market volatility, real estate properties give stable and regular monthly income through rent along with the additional benefit of increase in the capital value.
Wealth creation and estate planning
Majority of the times we buy real estate with small upfront investment in the form of down payment and we prefer to get the rest of it financed. Over time, the principal amount of the mortgage starts getting paid and that gets faster towards the end of the amortization period. This reduction in payment of the principal amount helps build equity. Real estate is an investment which yields returns over longer periods. This makes it a perfect investment for retirement. Many people also prefer to use real estate investments as part of estate planning where the property ownership is passed on to the legal heirs.
5 common mistakes to avoid while buying a property
Real estate has always been an aspirational asset class. Whether we buy a property with the idea of investment, security or utility, a careful thought and due consideration must be given to all aspects before the purchase. It is a popular option amongst people today but it is often seen that people make blunders while investing in real estate. Some of the common mistakes are highlighted below:
Builder Credentials
When buying a residential or commercial property, choosing a reputed developer is vital. Reputed builders ensure quality construction, best amenities and adequate facilities. They understand buyer sentiments and hence design buildings suited to the dynamic needs of the buyers. Moreover, the biggest benefit of buying from a reputed builder is on time delivery. Managing timelines in real estate is crucial and builders who are conscious of their reputation will never go back on their commitments of delivery, possession, documentation and quality.
Selecting the right location
Price must not be the only consideration when it comes to real estate purchase. We often get lured by lower prices but overlook the location of the property. If a property is purchased for the purpose of utility, it must be located in an area that offers basic facilities of daily life, absence of which might create major hassles in life. Even in case of commercial property, the location must be accessible and public transport must be easily available.
Facilities to look for
Today when we buy a property, we do not just see the four walls, we look for additional facilities. With a fast moving life, recreation and relaxation is a must and we all look for that in the comfort of our own house. It is essential to check the amenities being offered by the builder. They must serve the needs of all members of the family. We buy properties with a view to use them for a long term, so it is essential that the facilities provided must take care of all our needs. Parking should be one of the major consideration. While buying a property, we must always look into the future and buy additional parking now than spending a huge amount on the same later.
Adequate research
Incomplete research while buying a property can lead to bad decision making. While the location of the property is important, there are other factors also that might be ignored by buyers at times. It is important to ensure the immediate surroundings of the building. Health and hygiene must not be compromised in case the property is located in an area near to dump yards. Also, we should check if there are chances of air, water or noise pollution in the vicinity. The area we choose must inhabited appropriately and safe.
Hasty decisions
Buying real estate is always an emotional decision. We tend to get attached to the property the moment we see it and start dreaming of owning it. While we are in the research phase, it is essential that we keep our minds open and also free of biases and filters. These might cloud our decision making. All factors must be carefully considered which includes – adequate research on location, facilities, choice of builder, paperwork and documentation.