Real Estate Investment Mistakes You Should Avoid

7:30 AM

Real Estate Investment Mistakes You Should Avoid

Never go for a property just because you can afford it. Think about the long-term expense. (Dreamstime)

Though there is no single way of doing the right thing, investment is one field where this might not apply. Investors often commit mistakes which can cause a lethal impact on their future returns. When it comes to the property market, it is important to understand the nerve and where all the pitfalls are and how to avoid them. Take real estate investment as an activity which has certain dos and don’ts and a few rules that have to be followed for a pleasant experience.
Thus, real estate investors should avoid these deadly mistakes:

No plan in sight

Real estate investment requires lots of planning. Most of the investors buy a property without thinking what they are going to do with it. Buying an asset just because you got a good deal should not be the case, especially when you are investing too much into it. The right way of doing investment is to write down your goal and then decide on the type of investment and the property which can be the best fit for attaining your goal.

Unrealistic expectations

Don’t think you will get rich as soon as you buy the real estate. People have this notion that real estate makes you rich but it’s not the complete truth. Real estate is a long-term investment and investor needs to be patient and have a high tolerance for risk to play smart and make the most of the real estate market at the right time of the cycle.

Being anti-social

Creating a network is very important if you want to be a successful real estate investor. From plumber to architect, anyone who is remotely connected to the property market can be a useful asset to you. Build your network of real estate professionals who can give you the right advice about the property market and can suggest the way forward. These valuable insights should not be ignored.

Putting in too much

Sometimes it happens that investors do not make money at all even when they have invested in a good property. This is probably because of the reason that they have paid too much while buying. An investor needs to get the right quote to make a deal or look for property options where there is more scope for making profits. Paying too much just because you think the property is too good to be bought is against the laws of real estate investment.

Unawareness

To be a successful real estate investor, it is important to be aware of the real estate happenings and market movement. An investor should educate himself about the real-time events in the property market. This helps in the planning of a future course of action.

Missing out on due diligence

Few investors make quick deals without going in for due diligence. It happens that investors buy the property just because it is going to appreciate in future and will reap them good benefits. But wise investors should understand everything that shines is not gold. Proper documentation and due diligence is irreplaceable and cannot be avoided when considering a safe investment.

Not planning cash flows

Few investors do not foresee the crises and make hurried investments. To be a smart investor, it is important to estimate your finances beforehand so that you don’t miscalculate the present situation and take decisions which can pull off in financially stressful conditions.

Getting stuck

An investor never holds back a property for too long so it becomes a dead asset. He enters the market, makes profits and exits it. It is not advisable to stay in the corner and bear the carrying cost of the property unless the market is too good or you own a really significant location. Plan multiple exit strategies before you enter the investment so that you do not get succumb to the stagnant real estate market.

- by Surbhi Gupta
Source :- PropTiger

Interest Rates

Is House Price Or Interest Rate More Important?

7:30 AM

Is House Price Or Interest Rate More Important?

(Dreamstime)

Property buying is triggered mostly by a fall- either in property prices or the housing loan interest rates. Thanks to demonetisation, one has already happened. Owing to the high cash reserve ratio, banks have cut interest rate on home loans making them cheaper by up to 8 per cent, home prices have failed to trigger sentiments in home buyers who are still on the fence about investing in property. This has led to a vital debate between the industry stakeholders that whether cheaper home loans are enough to fulfil the mission of Housing for all 2022 or we have to look beyond the obvious to make it a workable plan. Here’s the complete story -

How low-interest rate impacts property buying?

Low-interest rate implies cheaper home loans and less interest to be paid to the banks. As the amount paid to the bank has higher interest component than the principal part, lowering of lending rates leads to higher savings for the buyer. For instance-

Suppose your loan amount is Rs 50 lakh available at an interest of 10% for the tenure of 20 years, the total interest payable is Rs 65 lakh. Whereas if the same amount is loaned at the interest rate of 8 per cent for the same tenure, the component payable as interest will be Rs 50 lakh. The impact is also visible on EMIs as in the former case the monthly instalments were close to Rs 48,000 while in the latter the EMIs came down to Rs 40,000.

While experts have always pointed out home finance as one of the biggest setback for Indian real estate as some countries offer credit as low as 4%, it will have little impact on those buyers who intend to purchase a bigger home as the cost of property would still remain stagnant.

What if property prices come down?

Cheaper homes would mean a lesser burden on the pockets and less external borrowing. Considering that down payment remains 20 per cent of the property value, it would be easy for any buyer to arrange the rest of the funding for buying a home and to afford it with easy on pocket EMIs. For instance-

Suppose you want to buy a property worth Rs 50 lakh for which the loan amount is Rs 40 lakh. With an average interest rate of 9 per cent for 20 years, the total EMI would be Rs 36,000. The total interest payable is Rs 46 lakh. Whereas if the property you want to buy is available for Rs 40 lakh for which the loan amount is Rs 32 lakh, the interest payable is Rs 37 lakh and the monthly instalment would be Rs 28,000.

In this case, the buyer is saving on the down payment, on the interest component as well as on the EMIs to be paid. While the interest rate assumed is less than the prevalent rates, the total savings are almost comparable in both the situations.

The bottom line

While both of these factors are equally important for making the dream of housing for all a reality, each of these is variable of other. Slashing interest rate with price correction would make a stronger impact than any other policy change. Home loan interest subsidy, affordable housing, easy finance are some of the initiatives that will catalyse the change soon enough. While the government is committed to make home buying a pocket-friendly experience, policy makers have to frame rules such that even the lower middle class take a step to own a shelter of their own.

- by Surbhi Gupta

Source :- PropTiger

Buying a House

Larger Down Payment Vs Buying An Affordable House

4:39 PM

Larger Down Payment Vs Buying An Affordable House, Know What Suits Your Pocket

Home buying is certainly one of the most important decisions that a person takes in his life. But what is much more confusing is to decide what kind of housing will be more suitable for him. Given a set budget, a buyer has several options to choose from, but the most typical one is to decide between- a big home and a large down payment or an affordable home with fewer mortgages.

Here’s is a brief analysis:

The down payment scenario

If you have liquid cash, assess the situation as what kind of home you should opt for. Buying one large home means high pressure on your pockets along with higher EMIs and another monthly outflow. Even if you have high disposable income, it can put excess pressure as every month a significant part of it will go into the monthly instalments. Moreover, if there is no fixed income, you might have to foreclose the loan, in case you missed out on EMIs and be a loan defaulter. Whereas if you are opting for a cheaper home your loan amount would be much less.

Sample this:

Rajesh Keswani lives in a metro city and has Rs 20 lakh liquid amount as cash to invest in his home. He aspires to live in a gated community where there are resort-like amenities of a tennis court, swimming pool, gymnasium etc, which will cost him Rs 70 lakh. While Rs 54 lakh will be the loan amount, at an interest of nine per cent, after paying 20 per cent down payment his monthly instalments will be close to Rs 50,000. There is another home with similar amenities but not in a gated society. It does not have a sprawling private park but is right in front of the public park. The cost of this home is Rs 50 lakh. With Rs 10 lakh down payment and Rs 40 lakh as the loan amount at an interest of nine per cent, the EMI will be Rs 36,000. Keswani will be saving Rs 14,000 per month from his disposable income along with an extra Rs 10 lakh in hand.

With lesser EMI to be paid, a buyer can use the remaining amount in other investment avenues and can earn returns to save for another home or even for his retirement nest.

Hidden Cost

The cost of buying a home is a sum of the property price, service tax, stamp duty, registration charges, parking fee etc. Do factor in these costs before you finalise on a home. These are one time hidden expenses which are often overlooked by buyers.

Apart from these, there are few monthly expenses such as property tax, home insurance, minor wear and tear which will be your responsibility as a property owner. These expenses will be paid from your disposable income which would add up to your monthly budget.

Benefits of buying a cheaper home

Cheaper home has its own benefits. For instance-

1) You can save for purchasing your retirement home or another property to take the maximum benefit of real estate market.

2) You can invest in any other investment avenues for a shorter period of time where you can better returns than real estate.

3) Maintenance cost of a small home is far less than a big one.

What are your options ?

If there is a certain set of aspirations attached to the type of property you want to buy, you can shop around and look for better deals and negotiate the price. Since the property prices are at the lowest, this can be the best time to make the deal, provided you look around diligently.

- by Surbhi Gupta
Source :- PropTiger

Expectations from Budget

Realty industry expectation from upcoming Union Budget

2:34 PM

Industry Speak : Realty industry expectation from upcoming Union Budget

Mudhit Gupta, CMD, EMGEE Group: ”We are looking forward to the Union Budget to have some interesting incentives for the low cost housing segment. We expect the government to look into the taxation slabs for personal and corporate sector, stamp duty and introduce some benefits for the primary house buyers in the affordable housing segment. We propose that the tax free slab to be raised from current level to about 5 lacs and a tax rate cut for personal and corporate taxes. The demonetization process has brought surplus capital into the system which will help increase cash flow into the PSU banks. The stamp duty charges should be reduced down to 2% from the current 5% to encourage more frequent transactions leading to higher revenue growth. We also hope the stamp duty should also be waived off for affordable housing in the Pradhan Mantri Awas Yojana (PMAY), housing for all. We are looking forward to some strategic policy changes which will accentuate the growth of the real state sector and the overall economy of the country in the upcoming fiscal.”

Sunil Mishra, Chief Business Officer, PropTiger: “It’s time for the Industry to acknowledge that demonetisation had a severe impact on sales, as potential buyers kept on postponing their purchase decision, waiting for an imaginary fall in property prices. The Dec 31 announcement of the PM will help the ultra-affordable segment quite a lot. The Home Loan rate cuts are having a positive impact on a wider customer segment. I would look forward to some overall confidence-boosting measures in the Feb 1 Budget, which will put more money in people’s hands, and that itself will bring back home sales to pre-DeMo levels. Under that, specifically, some cut in the tax rates for middle-income groups will be the most awaited measure. The context of the Feb 1 Budget is against a 3-year gradual slow-down of Residential Real Estate sales and a crippling slow-down since Nov 9, 2016. To address the immediate situation created out of DeMo, there has to be some message from the national leadership encouraging home-buyers to go ahead and not postpone their decision – either from Finance Minister or Minister of Urban Housing. This will be a clear GDP-enhancing measure. For the long-term, cuts in income tax rate, and possibly in stamp duty for home registration could be measures that may help the Real Estate industry in getting a jump-start.”

PNC Menon, Founder Chairman, Sobha Group: “In recent years, for individual home buyers, prices have continued to increase by approximately 7-10% per year. From our perspective, we would like to see the government increase the income tax benefits to this group of home buyers. When we consider the affordable housing segment, we would be delighted to see income tax benefits that can be extended to corporates when they expand through new construction. Given the introduction of the Goods & Services Tax (GST), homes will also now attract a tariff. From our perspective, it would be beneficial if home buyers can come under the lowest possible slab of the GST, thereby enabling greater affordability for potential home buyers. The “Housing for All” initiative needs strong private sector support to achieve its intended objectives, which I am certainly aligned with.”

- by Ashvita Singh

Source : Accommodation Times News Service

Real Estate Investors

First Time Investor? Follow These To Make Money Out Of Real Estate

3:38 PM

First Time Investor? Follow These To Make Money Out Of Real Estate

(Dreamstime)

Real Estate is one such investment channel which does not have any set parameter or budget restrictions or compulsory lock-in period. Instead, the property market is a liberal avenue where you can enter and exit at your own will, though risks will be higher and gains will be short but with limited obligations, real estate investment is the best way to get rich. Beginners often get confused about where to start from and what are the options available for them. Here is a quick guide for those market investors who are still confused about the first step.

REITS

Real Estate Investment Trusts are very popular across the globe but have gained popularity in India recently. In simple words, REITs are very similar to mutual funds and bonds. Mutual funds are investment channels to earn returns through equities whereas REITs offer you benefits through income generating real estate assets. As the name suggests, these are trusts which include numerous investors and put funds in income-generating properties like offices, residential societies, malls, hotels etc. These trusts are then listed on stock exchange and the investor can buy units in the trust. There is a trustee who independently holds the assets on behalf of unit holders.

While the REITs are listed on stock exchange, the funding is raised from the holders through Initial Public Offering (IPO). This money is used by the trust to buy properties. These assets are offered on lease to tenants and the rent received flows back to the investors as returns. This concept started in the United States of America, later adopted by Singapore, Australia and Hong Kong to enable investors to earn from income generating real estate properties.
For those who want to invest in property market but want to avoid direct ownership, REITs is an ideal option for them. It gives stable income minus hassles of paperwork and documentation with no budgetary restrictions. However, the risk associated with this kind of investment is that the unitholder does not have any control over trust’s action of entering and exiting the market.

Direct ownership

If you want to have complete control over your assets, it is advisable to go for direct investment in the property market. Direct ownership simply means buying the property on your own, through your own funds or borrowed sum with the liability on you and have a rightful share in the returns generated from the property.

While there are multiple ways of generating returns from a real estate asset, the most prominent one is to rent it out to tenants. The monthly rental can be used to pay off of your home loan or can add to your share of returns. Additionally, the appreciated value of your property will be your long term gain that you can leverage once you exit the market. However, being a landlord involves many responsibilities including documentation, tenant verification, property maintenance, rent collection etc. If you are going to buy more than two properties for leveraging rental income, it is better that you opt for property management services who can manage all these tasks at a very reasonable cost.

Another way of entering the real estate market is betting on short-term real estate cycles. However, the risk associated here is higher than the previous method. Buying an under-construction property and exiting the market as soon as it gets into possession phase is one way of taking benefits of the real estate market. Since under construction properties or soft launch projects are available for about 40 percent less than the market value, an investor has a better scope of earning returns as compared to other investment channels.

- by Surbhi Gupta

Source : PropTiger

#REITS #RealEstateInvestmentTrusts #Real_Estate_Investment_Trusts #RealEstateInvestors

Indian Real Estate

5 key things to look forward in real estate in 2017

1:36 PM

5 key things to look forward in real estate in 2017

The first half of the year saw the clearing of inventories and sales started picking-up slowly and steadily with developers offering discounts during festivals like Gudi Padwa and Akshaya Tritiya.

Image Source: IANS/Xinhua/Tan Jin

With sky-rocketing property prices and high home loan interest rates, first time home buyers faced hardships in buying homes in top metros of India in 2016 resulting in slowdown in demand and rise in unsold inventories but the new year is expected to bring some cheer for property buyers, say experts.

The first half of the year saw the clearing of inventories and sales started picking-up slowly and steadily with developers offering discounts during festivals like Gudi Padwa and Akshaya Tritiya.

The commerical segment witnessed progressive growth during the year while the residential segment saw gradual progress, cited Wadhwa Group in a recent press release.

The year also saw real estate developers focusing mainly on delivering existing projects than concentrating on launch of new projects.

“The industry faced headwinds in terms of slow sales which was then followed by a reduction in project launches. Interest rates that were expected to come down stayed stubbornly high,” Gera Developments managing director and CREDAI-Pune Metro vice president Rohit Gera, said in latest press release.

However, it was the landmark year for the real estate sector as the government passed laws such as Goods and Services Tax (GST), Real Estate Regulation and Development Act (RERA) and Benami Transactions (Prohibition) Amendment Act, which are set to bring transparency and accountability into the realty in 2017.

Also, the government's latest announcement of demonetisation will help to curb black money being invested into properties, fall in interest rates and rise in sales going forward.

Here are five key things real estate developers and consultancies look forward to in 2017:

1. Interest Rate

The rate cut by Reserve Bank of India (RBI) in 2016 brought a ray of hope amongst the buyers but the banks will also have to pass down the benefit to the home buyers to encourage the prospective buyers to move a step closer to purchase their dream home. Interest rate is one of the important factors as the equated monthly instalments (EMI) is directly linked to it. Therefore, if the banks pass on the benefits and the EMIs fall, we feel the demand for the housing should witness momentum as far as buying new properties are concerned--Ashwin Sheth, CMD Sheth Corp

2. RERA Act

The RERA Act will strengthen the association between a buyer and a developer immensely. The act will consist of a registration mandate, and strong penalties will ensure that the home buyers feel secure about their investments and further enhance the residential sales. It will play a significant role of a supervising authority for any land or home deal that takes place. The policy initiated by the government will help propel the growth of the organized real estate sector going forward-- Navin Makhija ,Managing Director, Wadhwa Group

3. Demonetisation

The government will take actions to back up the move of demonetisation. This may further create some amount of issues for some developers. However, the much awaited reduction in interest rates as well as benefits expected in the budget should help revive the industry over the next few months-- Rohit Gera, Managing Director, Gera Developments & VP, CREDAI – Pune Metro

4. Top residential investment hotspots

The top five hotspots for residential property investment in the country in 2017 will Mumbai, Bengaluru, Hyderabad, Ahmedabad and Chennai. These cities are more or less regulars on most hotspots lists, but there is a sound rationale behind their consistent performance year after year. Not only are these cities attracting new businesses and industry, their respective governments are also investing resources in building adequate infrastructure to attract capital-- Ashwinder Raj Singh, CEO – Residential Services, JLL India

5. Benami Transactions Act:

The Benami Transactions Act will curb black money flow into real estate and also render holding of property under fictitious names a punishable offense. Budget 2015-16 further announced imposition of a heavy penalty on property transactions carried out in cash. This amendment promises to make incidences of unaccounted monies getting parked into real estate next to impossible—Anuj Puri, Chairman and Country Head, JLL India.

- by Tejal Yerunkar

Source :- Zeebiz

#Demonetisation #RERA #InterestRate #Benami #BenamiTransactionsAct #Residential_Investments #RERA_Act #GST

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