There are numerous ways to invest. However, the investor must be cautious to select a proper area that is safe, secure, and offers reasonable returns. In the past, investments in bank deposits, stocks, mutual funds, insurance policies, and bullion were popular.
With the globalization of the economy, other investment areas have emerged. This complexity has led to the rise of specialized investment advisors.
Bank deposits, insurance policies, and mutual funds have become less attractive due to low returns and the failure of many companies. The stock market remains unpredictable. These investment avenues are suitable for short-term investments and require close monitoring.
Nowadays, real estate has emerged as a safe and high-yielding investment opportunity. Real estate investment is long-term and requires significant funds.
Calculating Returns in Real Estate
The yield in the realty market is calculated based on the capital invested and annual rental returns, minus property tax, income tax, and annual maintenance charges. This return varies depending on the property type.
Key Considerations for Real Estate Investment
- Investment Amount: Real estate requires higher amounts, with minimum entry levels ranging from lakhs for residential properties to much higher amounts for commercial spaces.
- Sale of Property: Finding a suitable purchaser and complying with legal requirements can take a long time.
- Appreciation: The capital value of the land appreciates slowly but steadily, unlike stocks and shares.
- Legal Compliance: Realty investment involves complex processes like title verification, land use laws, floor area ratio, and restrictions on sale.
- Taxation: Uncertain tax rules and rates need to be considered. Property tax, rental income tax, capital gains tax, stamp duty, and registration charges vary from state to state.
Types of Property
Real estate offers two types of returns: monthly rentals or returns from the lease amount invested in banks, securities, or business. The other type is the returns from the sale of the property.
The amount to be invested also depends on the expected mode of returns. Generally, leasing of property is attractive to business people. While commercial properties and office spaces yield high returns of up to 15%, residential properties yield about 8%.