1. Real Estate is Tangible Asset :

Real estate is one of the best tangible assets to invest in for both buyers and sellers. There is always demand for Residential Housing in all developing & developed countries. And also demand for real Estate particularly Residential never goes down*. Also, agricultural land is another tangible asset to consider for investment as well. It has multiple uses for farmers or businesses who need long-term access to land. Compared to stocks, bonds or any other investment, Real Estate has Higher tangible value. Over time value of these assets keeps growing. Real Estate moves ahead in terms of safety compared to any other investment. 

2. Real Estate Value keeps increasing overtime : 

Some Key factor-like Infrastructure development, Facilities in the area/Project, Quality of Neighbourhood, Government Policies, Job-Creating area, Population growth, Migration to developing area, Cost of borrowing, Supply and demand ratio, Proximity to daily commuting areas/places, growing technology, modernisation, increasing nuclear family, all this contribute in increasing value of the real estate. 

3. It’s under your control in increasing value of a real estate property :  

In real estate, you are in the driver seat, which gives you a lot of control over investment. As a result, the risk is minimised. When the market grows, simultaneously your property grows its value. It's nothing but building up your equity. Whereas in stock there are numerous factors that are beyond your control, which may put your money at risk. 

4. Equity Keeps building in Real Estate :

Equity is the difference between the fair market value of the property and the amount of money you owe the lender who holds the mortgage. You can simply put it as, the amount of money you would receive after paying off all the mortgage when you sell the property. 

Let’s understand with an example, The fair market value of your property is Rs.1Cr and you owe Rs.70L on the mortgage. Your equity share is, therefore, Rs.30L when you sell the property for the fair market value itself.

Some useful ways to improve your property equity, 

• > Renovate your property.
• > Including a rental unit.
• > Pay more as a downpayment.
• > Choose a shorter mortgage period*.
• > Selling your property when the market price is high.

5.Most important, real estate can be leveraged : 

In real estate, leverage means borrowing money from the finance organisation to fund your Real Estate property. You can use leverage by investing in those performing properties which has the capacity to generate higher returns on investment.

Let’s understand with an example of why most people make their fortune in Real Estate by using leverage.

• > Abhi uses Rs.5,00,000/- to buy Gold = worth Rs.5,00,000/-
• > Basu uses Rs.5,00,000 to buy stock on margin = worth Rs.10,00,000/-
• > Chetan uses Rs.5,00,000/- to buy a Real Estate property = worth Rs.20,00,000/-

10Years Later…

Let’s assume an AVERAGE annual Growth of 5%. (Do consider this is just a prediction, it could also be 10% for 1 year and also less than 5% in another year. However, just for calculation, we will take 5% as average. [But The Reserve Bank of India’s House Price Index tracking home prices in 10 major cities puts the average return from real estate in the last 10 years at 11.6% per year. This exceeds the return offered by the equity market at 11% as well as Gold offering a return of 8.8 % over the last 10 years.(Source: Financial Express)]

•  > Abhi’s Gold is worth Rs.8,14,447 = Profit Rs.3.14L.
•  > Basu stock is worth Rs.16,28,894. After paying back Rs.5,00,000 margin and Rs.5,00,000 capital = Rs.6.28L is the profit.
•  > Chetan property is worth Rs.32,57,790. Loan amount Rs.15L + Interest at 7% (Rs.9.26L) = Rs.8.31L as profit.

Chetan will also get some additional Bonuses such as

• > Rental Income. (If the property is residential)
• > Tax Deduction.
• > Government housing schemes.  

Putting it all together, In Real estate, taking advantage of leverage through financing a property can be an investment strategy.  

6.Real Estate gives an opportunity to earn the best return on investment :  

The most motivating factor in real estate is the opportunity to increase wealth over time. So Investing in a property that has the potential to generate profit is crucial. If you know how to estimate profits before investing, you can make a wise choice among the assets, which increases your ROI in real estate.

7.Cash flow can be predicted :

The benefits that you receive every month from a rental property is known as cash flow. Let’s say your monthly cash flow is greater than your monthly expenses and debt repayment, then the property is said to be a positive cash flow. 

8.One of the best way to passive income source :  

We believe you know how passive income can bring changes in one’s life. We don’t want you to be fooled under this “Passive Income” name. A lot of work is involved in creating a passive income source at the primary level. Once Investment is established you need not be participated regularly to make money. The real estate market has helped many real estate investor in increasing their wealth. You should consider a deep understanding of the real estate market is needed to enjoy the benefits. 2 Best ways by which passive income can be generated in residential real estate. 

• > Rental income 
• > Selling property when the market price is high.

9. Can take advantage of inflation :

When Inflation hits the market you get 3 main advantages that benefit's in real estate investments, they are, 1. Lock in a mortgage with a low, fixed-rate. 2. You won’t be exposed to rising rent. 3. Property value increases over time.

10.Tax Benefits :

Short term extra saving can be enjoyed by taking advantage of Tax deduction. This is true when you get a home loan to buy a property. Under section 24 of the income tax act, Taxpayers can claim a tax deduction of up to 2Lakhs against interest payment for self-occupied property. The government offered tax benefits for 1st time home buyers under section 80C with a benefit of 1.5L on the principal repayment of a home loan for a home worth Rs.40L.

11.Promising retirement plan :

Stable passive income can be generated by investing in rental property. Right planning is needed to secure your Retirement life with a guaranteed return on investment. You can either choose to invest in a second home and get a study flow of income or you can put it out for sale when the property price is high and also at the right price.

12.Real Estate is easy to understand :

A lot of Investment parameters are involved in other investment when compared to real estate. It’s easy to understand by knowing facts around that property in which you're going to invest. Most people consider real estate as a secure option compared to others. Some key things can be found and understood easily with very little effort. Things such as 

• > Property Location and surrounding. 
• > Neighbourhood Quality. 
• > Connectivity. 
• > Proximity. 
• > Crime rate. 
• > Infrastructure & utilities. 
• > Transportation and access.
• > Noise & Smell. 
• > Population Growth. 
• > Age & Spending habits. 
• > Community. 
• > Climate & geography. 
• > Construction style and quality. 
• > Clearances (NOC). 
• > Statistics. 
• > Attractions. 
• > Job-Creating factors.

However, While selecting the property you need to consult someone who can suggest a perfect property base on your real estate goal. When it comes to titles, hiring a proper legal adviser is a must. You should never take this step for granted. Every loophole has to be identified and sort it out legally. 

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. Avenue Nest does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.