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Real estate Investment has been an emotion for Indians since ages, “Apna ghaar Apna Makaan” is always a dream for all middle class Indians. Let us analyse & interpret the financial perspective of Investing in Flat & Plot/Land in 2021. Real Estate has been a potential alternative investment for most of the Indians, it can generate income in the form of rents as well as capital gains.

Real Estate as an asset class can provide diversification benefits to an investor’s portfolio and a potential inflation hedge because rents and real estate values tend to increase with inflation.

What is Diversification & Potential inflation hedge?

Let us understand it with a simple scenario, diversification refers to picking up multiple fruits of various characteristics and making a favourable basket for an individual as per their tastes & preferences. So that if , 3 out of 10 fruits rot for any external reasons then, we have rest 7 to manage our appetite. Similarly, Investment Diversification works in the same way to balance our portfolio returns and reduce the risk of losing the entire asset.

Potential Inflation hedge will help an individual investor grow his/her money irrespective of increase in cost of living/prices as Land is always an appreciating asset and its value increases with time.

Analysis & Financial Perspective towards Investment in FLAT

Let us begin with an extensive analysis of FLAT Investment

FLAT

1. Rental Income: Investing in a fully-fledged ready flat can generate rental incomes. It is one of the most popular form of real estate investing. It will help an individual reduce his risk of failing to repay back loans & adjust maintenance, if you buy it at the cost of a home loan. HDFC Bank is the most recommended bank for Home loans based on their offerings & Service.

We will learn more regarding rental incomes and Real estate decision factors with respect to loans in the coming journals. Stay tuned!

2. Ease of getting Bank Loans for home: It is easier for an individual to get access to home loan for a flat as compared to other forms of real estate such as Plot.

The major benefit attached is low upfront capital required which means even 90% capital can be granted for loan. Let us understand with an example, if you are planning to buy a house worth ₹50 lakhs then you can own the same only by giving an amount of ₹5 lakhs & rest ₹45 lakhs can be under loan utilisation.

3. Flexibility: We don’t have any flexibility to modify.

4. Risks involved: We have least risk in the ready to move property but there is a risk of incompletion for an under construction property. There are chances of delay in construction and fraudulent promises which can burden one individual paying interests and rent of his/her previous house.

5. Return on Investment: Real estate returns for a fully constructed flat are moderate and can range in between 8%-15% per annum. However, returns for an under construction flats can be higher, can range in between 12%-18% per annum as we purchase it at a discounted price which a risk hedging strategy for builders to sell all the flats on time.

6. Tax Benefits: A buyer will be entitled to home benefits and tax deductions under Sec. 80C and Sec. 24. We will highlight more about the same in the Tax section. Stay tuned!

7. Security: Investment in Flat is more secured as compared to Plot.

We will learn about Investment in PLOTS in the coming journal. Stay Tuned!

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