Real Estate - A Real Investment Option

Indeed, real estate is an attractive investment option, as it gives regular returns and also provides capital appreciation. This is the scenario presently unfolding in India in the last few years. Before the start of the 1990s, real estate was always looked upon as a place to invest money, since prices were always escalating, because of limited supply and heavy demand. Developers were building residential and commercial projects, which were sold out even before the construction began.

But the housing market saw a crash and crisis in the mid 1990s. The higher the rise in real estate prices, the steeper the fall. This was true, especially, in the metros, e.g. Mumbai and New Delhi. The supply increased enormously and the demand remained steady, as prices had gone beyond the realistic levels. This decline in prices stabilised towards the end of the decade as rates became more reasonable and affordable.

In the meantime, the housing finance industry started to expand rapidly, making home loans easily available to everyone. Besides the housing loans boosting the market demand, the tax benefits provided by the last four consecutive budgets have also encouraged the end-users and investors alike. Growing incomes of urban buyers coupled with fiscal incentives and falling interest rates, has seen disbursements by Housing Finance Companies grow at over 35% per annum in the past few years.

And there have oft been these 'rags to riches' tales of landlords cashing in on their lands (once-upon-a-time barren and quite useless), because of development within or around the area. So real estate, which has had its own share of ups and downs, is currently on an upswing and certainly becomes a viable investment option. But like they say, when it comes to investment risk is part of the game. There could be a boom one moment and crash the very next. Therefore, it is always important to use wise counsel before you invest, in real estate or otherwise.

The rental rates in India are among the highest in the world as returns on investment on the capital value of the property.  Investment in commercial property, where the returns are 10 to 15 per cent, is a proven option, while residential property is always in demand for leasing. So, if you have some real investment ideas, then maybe now is the best time to plonk it on some good, urban real estate!