Thursday 14 November 2013

INVESTMENT IN REAL ESTATE IS A GOOD OPTION

INVESTMENT IN REAL ESTATE IS A GOOD OPTION

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It is the general trend in a civilized society that people do earmark a portion of their income for meeting unforeseen circumstances and for meeting the future needs of self and family during the lean period including old age. Financial management if adopted in a scientific way would bring in attractive returns on the investments made. The investor should be prudent enough to select a proper scheme from out of various options keeping in mind the safety for his investment with assured good return.



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Till recently, bank deposits, stocks, mutual fund, insurance policies and bullion were the most opted options by the people. Presently, Bank deposits, insurance policies, mutual funds have become unattractive because of low returns while the stock market is unpredictable and volatile. Moreover, the investment avenues in stock market need close monitoring. With the globalization of the business, many more options for investment have unfolded and the investment strategies have become very complex. This has led to the emergent of specialized investment advisers. According to many investment advisers, investment in real estate is safe and high yielding. But, the investment in real estate is a long-term investment needing considerable capital.


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The liberalized scheme adopted by the Government of India has awakened the hitherto dormant Indian economy and many multinational companies have set up their offices providing employment to a large number of people. The Foreign Direct Investment in real estate and the creation of Special Economic Zones have also given a fillip to the real estate sector.

Reverse Mortgage



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As a welfare measure, Government is considering introduction of a new banking system called Reverse Mortgage system to facilitate the elderly persons to get housing loan upon mortgage of their immovable property to meet expenses of certain specified categories such as medical expenses, repairs to the dwelling house etc. on the security of his dwelling house. The borrower can repay the money borrowed along with interest during his life time in installments or allow the debt to accumulate to be realized on the death of the borrower. The amounts outstanding will be a charge on the property. Thus, investment in immovable property would not only help the investor to have shelter over his head till death, but also get financial assistance without any commitment of repayment of amount borrowed during his life time. The manifold increase in the pay packets of the staff of multi-national companies and the migration of rural people to urban centers in search of assured income jobs and the desire to have shelter of their own have given a boost up to the real estate market. It is now the desire of every young person to have a house of his own in metropolis like Bangalore as a matter of pride and also to avail I.T. rebate available on investment in immovable properties. Since investment in property is huge, the investor should be cautious and consider various factors before making any investment in real estate.

Determining Factors


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 The yield in the realty market has to be calculated on the capital invested and the annual rental returns less property tax, income tax and annual maintenance charges. This return varies according to the type of property: residential, commercial or office space. In Bangalore the returns are about 6% for residential, 12% for office and commercial space.

Selection of a proper location is a primary determining factor in property investment. There is equal demand for all types of space in metropolitan cities. The demand and supply position of each sector such as residential, commercial and office space need to be carefully examined. Residential property calls for smaller investment. Commercial and office space need higher investment. In metropolitan cities the market trends are transparent on account of competition and frequent dealings. In smaller towns there could be higher returns because of shortage of accommodation with limited transactions. Local Government politics also plays a role in determining the returns from the investment in properties.


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