REAL ESTATE

Investing in real estate over the years has become increasingly popular and aspirational investment option.
India offers huge investment opportunities in Real estate, being the 5th most attractive real estate destination in the world. India is world’s 4th largest economy with 120 crore inhabitants. On account of globalization, increase in economic activity, polarization of large population towards cities in search of earning opportunities, rise in disposable income in the hands of largest population of India i.e. Middle class has given boost to investments in the real estate sector.
Favorable government reforms and policies such as repealing of Urban Land Ceiling Act, altering FSI rules, allowing 100 per cent FDI in the construction through automatic route, implementation of RERA have further strengthened confidence of investors in the sector. 
Government has announced to develop 100 Smart –Cities. As a result, Residential plots are gaining popularity amongst buyers in and around these potential cities. Also Initiatives taken to develop various Heritage cities by government would push growth in realty, along with proposed plan to develop Industrial corridors leading to growth in infrastructure even in interiors of our country At the same time, REIT initiative would give much needed liquidity push to the sector reeling under an acute funding pressure.
REITs in India would issue securities, which would be listed on stock exchanges. It will invest 90 % of the NAV in completed rent generating properties in India and 10% in developmental properties, listed/unlisted debt of companies, mortgage backed securities. 
They can raise funds from resident or foreign investors. It is proposed that initially the units of the REITs may be offered only to HNIs/institutions with minimum subscription size of Rs. 2 lakh.
Though a home is one of the largest investment an average investor does, however, home sweet home is just not the only thing for which people invest in real estate. There is whole lot of other real estate options worth investing. The most common type is income generating real estate such as, smaller apartments, single family homes, duplexes that are rented out to tenants.
Although the real estate market has plenty of opportunities for big gains, buying and owning real estate is a lot more complicated than investing in stocks, commodities and bonds. Though you cannot make your real estate investments risk-free, you must be aware of the possible pit-falls to property ownership. When you are planning real estate investments, first decide what kind of exposure to the real estate market is appropriate for your situation.
The first type of market you could participate in is ‘own the property’. Here, you would own and operate the piece of real estate yourself, and you would receive the rent payments and appreciation in property value.

1. Avenues of Investment in Real Estate:
  • i. Raw Land: Land can be improved to add value, thereafter; it can be leased or rented. Land can also be sold for profit in full or in parts.
    Some investors buy raw land in anticipation of land appreciating in value as a result of development in infrastructure, launch of new commercial and residential projects in and around it.
  • ii. 1 to 3 BHK Homes (500 to 1200 Sq. ft. carpet): Homes of such configuration are generally bought by the people for self-use to stay with their family. Also these homes can be rented out, sold easily and easy access to mortgage loan.
  • iii. Large Apartments -4BHK onwards, Duplex, and Bungalow: These classes of property often include pools, work-out rooms, full time staff and many fancy modern amenities. Such properties would call for high level of investment and maintenance expenditure. These kinds of properties are generally procured as family home and to get ‘arrived in life’ kind of tag.
2. Commercial Property:

Investments in these properties are made to conduct own business or to lease it out for regular cash flow. While commercial properties provide consistent income but at the same time, during down-turn in the economy they remain vacant for longer time.

3. Real estate investment trust (REIT):

It is a good way to take exposure in reality market, without doing large investment and having day to day involvement.
REIT to a real estate is what a mutual fund to stock. Large number of individuals pool their funds together forming a REIT and allow REIT to purchase real estate investments such as, shopping malls, large apartment complexes, bulk of single family homes, retail properties, offices, industrial properties, healthcare facilities, and storage buildings.
The REIT then distributes profits to individual investors. We can buy shares in a REIT via Demat account and they often have a relatively high dividend payment.
REITs are professionally managed by experts and due to their size can manage their own properties more efficiently than individuals.
REITs have been quite lucrative for investors however, it's returns are not guaranteed. Depression in a particular segment of real estate could hit REIT hard and may have serious impact on income. Say If the commercial sector is hit with recession or bankruptcies, profits and property values could plummet in this segment.
We have to decide how much active role we can play while investing in real estate market. If we are willing to dedicate required time and effort to evaluate properties, negotiate deals, search tenants and manage the properties; buying rental properties can be quite lucrative.
Most time-tested method of investing in real estate for the long term is simply buying a property, renting it out and holding it for the long run. This method has many benefits. First, it puts you in control of your investment. You decide how much you pay for the property, the rent you charge and the kind of tenants you allow to live there.
On the other hand, if we prefer to trust our money to the experts and don't want to worry about matters such as finding tenants and dealing with evictions, investing in REITs could give you peace of mind while also delivering good returns.

Cautions while buying properties:
    Features:
  • In recessionary situation and economic slowdown, many small developers declare themselves bankrupt or vanished altogether, keeping investors stranded. So, don’t blindly trust small developers with no linage of past performance in completing the projects but, who advertise low-cost properties in small towns and suburbs.
    Instead, invest in projects of renowned builders who have reputation of completing the projects.
  • To sell their properties some developer’s site existing amenities such as airport, metro rail terminal, school, colleges, I.T hub present in and around their residential/ commercial projects. As a result they are able to demand high cost for their properties. This makes such projects out of reach of most people.
    Therefore, several people who wish to earn good returns invest in properties near proposed infrastructure projects such as metro stations, expressways and airports, in anticipation that once these infrastructure projects are completed, the prices of properties would rise multifold.
    However, buyers must be cautious while investing in properties near "proposed" infrastructure projects. What if, for some reason the proposed infrastructure project gets delayed or does not materialize! Due to this the value of the property may stagnate or may take a deep fall.
    A buyer must do thorough investigation on developer’s claim. One must refer City D.P (development plan) copy available with the district town planner. D.P would show proposed highways, railroad, road widening, reservation for school, college, hospitals etc.
  • Do thorough search if the land title is clear and is free from any encumbrances. Several land-related transactions such as partition, mortgage, agreement to sell, and court order are not required to be registered. Even when a sale is registered, the history of the title is not verified! If you are buying land, you must trace past ownerships to avoid any dispute in the future.
  • Also check if the seller is authorized to sell the land, all clearances are in place with no pending dues and taxes, the plot has mandatory approval from city Development Corporation and other local authorities and clearances for further development are in place.
  • Always issue notices in newspapers and use an escrow agent/service for payment, especially for high-value transactions.
  • Home buyers need to do thorough research to find the right price of the property under consideration and whether it would give the expected return on investment. They can speak to various property agents in that area on the pretext of being a potential customer. We must compare prices and features of similar properties in the locality as well.
  • Note that property sales carried out through power of attorney (PoA) is a contract in which the seller passes on the right to sell, rent, lease, mortgage, maintain the property to the buyer. But, PoA does not transfer ownership rights. Transaction of properties through PoA has no legal sanctity; immovable properties can be sold or transferred only through registered deeds.
    In several locations, an irrevocable power of attorney or sale agreement followed by an irrevocable general power of attorney and then bequeathing of the property to the buyer via a will are used to sell properties that cannot be registered through the legal route.
    If the property is not bequeathed by the seller to the buyer through a will, the legal heirs can claim ownership after the death of the seller. Even when a property is bequeathed to the buyer, the validity of the will can be challenged on terms such as the right of the owner to bequeath an inherited property. Banks also do not recognise such deals as there is no record of such transactions, PoA can be easily used to sell a property to multiple buyers.
    • So Invest right for peace of mind.

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