There are two broad options. one is direct exposure and other is indirect exposure.
Direct investment - 3 Options
In the direct exposure route, you directly invest in the property. Direct investment give 3 options.
They are, Plots of land, Residential and Commercial property.
Plots of land
Stick to buying land (Give link) through government agencies or through reputed developers. Steer away from buying agri or form lands from private individuals as it could be tricky and risky. Now a days many private and few private banks to give buy approved plots of approved land
Residential property.
In real estate this in this is one of the safer investment routes. This is a “Bricks and mortar” investment in physical real estate
There are 2 three options. They are are individual house, flat. Today many people likes old house and flats, because of its cheaper rate compared to new one and Infrastructure facility.
This way, capital appreciation and also gain through rentals.
However, when you invest in residential property there are many things that you will need to keep in mind.
See how the developer has executed his previous projects. Check if the project is approved by banks for loan purpose. Also, check if all the necessary approvals are in place. Check the location of the property. Ensure that there is infrastructure facility in close proximity.
Commercial property.
This would include both office property and space in retail malls. Here, too, there are 2 options .
First, invest in an under-construction property, which with guarantee or no guarantee of rentals.
Secondly you can invest in a part of a building that has been completed.
Indirect investment
This a way of investing in real estate without actually investing in the property. In the indirect investment route, you give your money to a professional to invest in any of the different kinds of property.
This would include investing in the sector through investing in fund yielding assets and the private equity route.
To invest in funds that invest in properties. These funds then distribute the rentals among investors.These funds invest in completed buildings, which means they take only the tenancy risks. These funds have been delivering returns about 13%. However, the entry threshold the minimum investment amount is Rs 25 lakh to Rs.50 lakh.
You could also invest via the private equity route. The PE fund will invest your money in one of the developer's projects. The entry limit for this is high, and the money is locked away for 5-7 years. The returns here are 25-30 per cent, because you partly take the project's execution risk.
Listed Real Estate Shares
Another way for investors to invest in property is through the purchase of real estate securities.Equity shares of publicly traded companies that invest in real estate. Investors can directly purchase real estate shares form stock exchanges.
Real Estate Equity Investing
Investing in real estate equity covers a broad range, from the direct purchase of a property to buying shares in a real estate investment trust (REIT) or a property unit trust. An investor’s concerns about diversification, liquidity, correlation and transaction costs will affect investment choices. Equity real estate investments can be grouped according to the level of direct or indirect ownership.
Points to be Noted
Unlike other asset classes (Shares, Mutulal Funds) real estate investment is highly illiquid. Further, the real estate market in the country is still highly unorganised. Though things have improved with the entry of organised players, a lot still needs to be done.
Very important, availability of quality of information that would aid buying and selling property is still largely not easily available. So, price discovery only happens in most cases based on the desperation of the buyer or the seller. So it would be difficult if you want to exit or enter the market at the price that you feel is right.
So, you choose to invest within the sector is to a great extent dependent on your risk appetite and your affordability. Whichever option you choose to invest in, you need to remember that real estate has its own share of risks.
Next Chapter..!
The Pros & Cons of Real Estate Investment Options
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