An investment in real estate is usually designed with a specific goal. It may be used immediately as a commercial investment or to earn a regular income. With the low costs of properties post-pandemic, making a property investment can yield dividends in the future. The real estate asset is purchased mainly for office or home use or as a way to invest in future appreciation. Every asset class has pros and cons. The decision is contingent on the motives of the purchaser.
Understanding the differences between real estate asset classes assets and different types of properties is essential for investors in this space. However, the information you can find is unclear or hard to comprehend. So, if you’re a new real estate investor or are just looking to learn the basics of investing in real estate, here’s a crash course on the different types of real estate asset classes, property types, and the essential things you must be aware of.
It has been the ideal moment in the past five years to purchase a property as an investment for personal use since prices and home loans are at their lowest levels. As a result, investors today have lucrative choices. Moreover, with RERA providing transparency and making payment options available, the chance of investing in an unfinished asset and the delays to completion is significantly reduced.
Indian real estate has attracted $4.3 billion in institutional investment from organizations like private equity firms, family offices, pension funds, and sovereign funds in 2021. However, this was down by 14% compared to the pandemic year 2020, as per the property advisor JLL India. On the other hand, the year 2020 witnessed an increase in investment due to two significant portfolio deals totaling $3.2 billion, announced in the final month of 2019. On the other hand, investments in 2021 were wide-ranging, with the initial three quarters showing improvement compared to the same quarter of the previous year.
Real estate for a better future
Making the future secure is usually accomplished by taking future needs or children in the back of one’s. It is the property for which one is planning long-term ownership or use. It’s not an investment. The money is invested in a home that won’t be liquidated or used to earn an ROI. This is a method for people to store money to be used in the future. As per the research done by 99acres, here are some of the real estate investment classes in India.
The real estate market in India is proliferating and has received a boost from self-made ultra-rich individuals who are investing actively in this area. The data shows that by 2021, the amount of ultra-high-net-worth people investing in residential properties increased over the previous year by 29%. The buying of second homes has become an increasingly popular choice for entrepreneurs. Following the pandemic, this sector in the property market saw a surge.
The typical Indian with assets of over $30 million owns two properties to their name. Experts believe that India’s residential real estate industry has seen increased investments recently. Investors, amid the outbreak, believed that real estate could be a solid and safe option to invest in. It also helps those who are struggling with financial fluctuations. In addition, real estate is believed to be a good investment choice that drives institutional demand. Real estate brokers consider that UHNWIs will be looking to acquire new homes by 2022. Most of them would like to invest in the local property first and then move to international markets such as the UAE, UK, and the US.
In India, the amount made by self-made UHNWIs is increasing. A lot of them have created successful businesses. Additionally, they have received funding from venture capitalists with very high prices to run their companies. In 2021, there’s been an 11% increase in the amount of UHNWIs in India. In India, Bengaluru was the highest increase in real estate investment. Delhi, along with Mumbai, quickly followed in the same direction. In these cities, investing in real estate can be an extremely lucrative option. This trend is predicted to drive the residential real estate market expansion in the next few years.
Benefits of buying real estate as an investment
The unexpected inflation rise in the economy can affect the cost of living for families/ individuals, including the surge in investment property prices. Due to inflation, the property investors can raise the amount they charge for rent, which becomes an additional burden for the tenants. The value of investment properties goes up to cover the rise in inflation.
On being the owner of a house, the mortgage payment does not get affected by inflation since it is pre-decided at the time of agreement with the bank, i.e., the absolute value of the property decreases with inflation. This is a blessing for the owners who don’t have to bear the additional cost of paying the extra rent. Therefore, purchasing a property can provide additional investment security during inflation.
As the saying goes, “Land will never stop growing because God has stopped making it anymore”, land ownership has been viewed as the best method to make real estate investments and will likely remain so. Many people purchase acres and sell in square yards or sq feet. Commercial properties, too, are a good investment for stable rents and an ideal alternative income source. The idea of earning rental income is the top priority for those who have put money into their personal or future needs. However, there are dangers of having to lease out a house and working alongside the tenants, managing the property, and even collecting rent.
Whether it is under construction or completed, residential real estate property cannot be priced in a way that one could expect colossal appreciation. Ready-to-move-in properties have also seen drops across India. However, the returns on the completed property aren’t that high because residential rentals are in the range of 1.5-3% per year.
Property under construction (Residential Retail, Office) has decreased at an average of 5 to 20% based on the location, developer, product, and other variables. There is no guarantee of short-term gains, but there might be a natural increase in the cost of a project as it is completed. In general, it’s the perfect time to invest in an under-construction home. The current property prices make a completed or under-construction residential property an excellent option to store money.
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