EV Adoption Rates in India – State Report Card
March 3, 2023Tesla takes an Aggressive Step to further Secure the Environment
March 10, 2023Having a certain amount of investment in real estate is good for your portfolio as it provides the much-needed asset allocation to your overall investment portfolio. Real estate is the most important asset class with about two-thirds of global assets allocated to real estate. However, not much information is available on the internet which is swarmed with data and information about SIPs and mutual funds. This article is for beginners who are looking at diversifying their portfolio with some investment in property/ real estate stocks.
Investing in real estate in India is not easy as it is a localized market with a lot of opacity involved. The real estate sector historically had fewer regulations with many builders infamous for defrauding homebuyers and leaving half-constructed properties. This made the youth wary of investing their hard-earned money in the real estate sector. However, with RERA and other laws and regulations, the government is trying to formalize the real estate sector.
So, let’s have a look at the different options for investing in the real estate sector:
1) You can directly buy a property like a residential or commercial property. But generally, the ticket sizes are large and you need a good understanding of the market, including location, market dynamics, builders’ reputation, etc.
2) You can invest in real estate stocks that are listed on the Indian stock exchange such as DLF, Godrej, Sobha, etc. You can also invest in a real estate focused fund.
3) Another interesting new instrument that has come up is REIT or Real Estate Investment Trust. This gives a high yield and invests in commercial properties. REITs generate a stable income stream through rents and distribute about 90% of their rental income as dividends and interest payments. It is very difficult for a normal guy to buy a commercial property that can cost up to Rs.5-10 Crores. Through REITs, you can buy a part share in a portfolio of high-grade commercial properties. The initial investment for REITs is Rs.50,000. A few examples of popular REITs in India are Mindspace Business Park REIT, Brookfield India REIT, Embassy Office REIT, etc.
Conclusion
For beginners, investing in REIT is a good way to start and will give an understanding of the Real Estate asset dynamics. Buying a residential property for your own use is also good as you get several tax benefits as well as emotional security.