Initiating an investment portfolio can be intimidating, especially for first-timers in a dynamic real estate market like India. While real estate investment in India is a lucrative prospect, getting it right is important to enjoy financial growth and secure one’s finances. You must assess whether an investment opportunity can convert into good long-term profits and understand the intricacies of the real estate market. Here are four pertinent questions that you, as a beginner, must ask to create a successful real estate portfolio in India.
Why are you investing?
Every successful investment needs a strong foundation that sprouts out of a clear purpose. Establishing your investment’s purpose requires answering some fundamental questions – do you seek long-term capital appreciation, a steady rental income, or a combination of both? The clarity in the investment goals will bring you one step closer to your decision and map out the next steps you need to take. You will then be able to set realistic expectations on when you will receive returns of investments, assess your risk tolerance, and select a development that suits your goals best. You will also be able to strategise diversification and expansion of your portfolio and plan exit strategies if need be.
What do you want to invest in?
The real estate market in India is diverse. Within the sector, there are a number of sub-sectors that can bring viable returns on investment – both long-term and short-term. Once your investment goals are defined, you can streamline your decision-making process and choose the outfit that aligns best with them. A residential property can generate recurring income when put on rent. Commercial space leasing yields higher rentals from multiple sources of income for extended periods. Industrial spaces in areas undergoing economic development have greater potential for appreciation while offering the benefits of versatility & adaptability.
How much are you investing?
The next step after determining the kind of entity to invest in comes the crucial aspect of finances. Your real estate investment in India goes beyond the requisition of funds for a purchase. You must consider ancillary costs such as maintenance, taxes, potential renovations, etc. You must also leave room for unexpected expenses, market fluctuations, and periods of property vacancy. You have to thoroughly analyse your financial health to ensure that your investment is feasible, sustainable and profitable in the long run. Only after you have factored these in can you have the full picture of the budget requirements for the investment. A well-articulated budget will be useful when approaching financial institutions for loans and evaluating the terms, interest rates, and repayment plans.
Where are you investing?
When it comes to real estate, location is the key – a property in a prime, accessible location will appreciate with time. Residential properties with good connectivity to such areas will give you better occupancy. If you are looking for a property with commercial space leasing opportunities, it is a good idea to research the historical returns of existing investors in the areas you have shortlisted.
However, the valuation of such properties will be on the higher side, thus increasing your investment amount. The trick is to identify locations that promise to be the ‘next big’ hub of economic activities – investing in such upcoming locations will heighten your chances of receiving greater returns on your real estate investment.
Getting your real estate investment in India demands a systematic approach, but given the potential rewards, it is worth the effort. Once you’ve zeroed down on a potential property, don’t forget to thoroughly examine it to ensure it checks all the quality standards – structural integrity, facilities and legal compliances included. Staying informed about the evolving trends and regulations will help you improve your investment strategies.
