Most people think real estate investments are not their choice because they think they are scary or it needs a lot of money to invest in. None of them is current, and to assure you, here are some great reasons why real estate is not only good but a great investment when done correctly. 

Post pandemic has been one of the best example to witness the growth of the Indian real estate industry. Some of the benefits enjoyed are corrections made in stamp duty rates, and a lower rate of interest this gave vertical growth in the real estate industry. These benefits were enjoyed not only by domestic buyers but even hold true for NRI investors as well who invested around USD 13.5 billion in Indian real estate last year. In the month of May and June 2022 have recorded the highest number of property transactions in the last 10 years, this shows a solid foundation of growth in the sector.

From the investment point of view, real estate has been traditionally one of the safest long-term investments not just with respect to growth standpoint but also to build a safety net for your family. While it is crucial to build a diverse portfolio with investments across equities, mutual funds, retirement plans, etc. one should choose a real estate investment as early as possible to enjoy some great long-term yield. To enter and excel in Real estate also does not require any special skill sets, unlike the share market, this makes it relatively simpler and easier as compared to another asset category. 

Some of the top reasons why real estate is a good investment

If you are thinking about investing in real estate, you are about to embark on one of the best investment journeys of your lifetime. Here are some top reasons you should consider it, even if you’ve never invested in real estate before.

1. Leverage Your Investment: Leverage in real estate is quite simple, the ability to use other people’s money to buy your own real estate assets. Assets that generate ongoing income for you, and that appreciate over time. Let us understand example, when you buy a property you can often borrow 80% of the purchase price from a mortgage lender. You only have to come up with just 20% of the investment price on your own. Let’s compare that against stocks, where brokerages don’t allow nearly the same extent of leverage. Even when they let you buy on margin, they often only lend up to 50% of your portfolio balance — and at high-interest rates to boot. Worse, they can “call” your leveraged stocks that you bought on margin if the stocks go down in value. In other words, they can force you to sell at a loss (known as a margin call). This doesn’t happen in real estate investing.
2. Tax Benefits of Real Estate Investment: Real estate investments also provide multiple tax benefits to you, especially when you purchase a house on a loan. Section 24 allows you to claim exemptions on the interest paid on the home loan. In addition to this, Section 80C allows the investors to claim tax benefits on the repayment of the principal amount as well. Also, if you are a first-time homebuyer, you can save up to Rs. 1.5 lakh on the principal amount under section 80 EEA, up to Rs.2 lakhs on the interest payable under Section 24. These tax savings can help you lower your spending and make the investment a lot more affordable. Finally, one might also look at ‘Depreciation Expense’, which is one of the biggest tax benefits and can also help improve cash flows by reducing tax liabilities. Also one can get an exemption on the capital gains too, if one decides to sell the property and invest in another one. Section 54 of income tax act makes provision for this.
3. Rapidly Growing Real Estate Sector: The Indian real estate market is growing at a faster pace. It is expected that the market for real estate is expected to grow Rs. 65,000 crores in 2040 and this would contribute almost 13% of the country’s GDP by 2025. Both large and small investors in India are once again realising the benefits of investing in real estate. With addition to this, in large numbers of young workforce or millennials is now investing in real estate for work-life balance, well-being, and for also future security. This trend would enable massive growth from other markets like Bengaluru, Pune, Chennai, Hyderabad, etc. This is elevating the growth prospects of the sector at a national level.
4. Potential For Appreciation: Historically, home values have increased (along with inflation) over time. So unlike vehicles and other liabilities, which are depreciating assets, real estate is considered an appreciating asset. With that said, appreciation potential will largely depend on where your property is located and that markets potential for growth.
5. Cash Flow / Passive Income: Real estate is a long-term investment. But that doesn’t always mean a property won’t start producing cash flow in the short-term. Let’s take a rental property for an instance, as soon as the rental is filled with tenants, it’s totally possible to receive passive income from rents every month. The key to buying a property that will cash flow is to run the numbers. Meticulously analyse and calculate all associated costs and expenses, including the mortgage. Check out average rental rate in the area for properties similar to yours. This will give you an idea of how much you can realistically charge tenants for rent. If your mortgage and total monthly expenses are less than your rental income, you’ve got a cash-flowing investment property! If mortgage interest rates decrease down the road, refinancing the property at a lower rate will add to your monthly margins.
6. RERA Act’s positive impact on Real Estate: With the introduction of Real Estate Regulatory Authority (RERA), the real estate sector received a much needed transformation build its reputation in become a much more transparent and customer-friendly ecosystem. This regulatory body ensures customers receive all the possible information on the developers and their projects along with completion and delivery timelines as well. Easy availability of information on project approvals and customer-centric legislative processes have further given confidence to the market and buyers. Along with RERA, a strategic streamlining of approval processes has helped increase the confidence level of domestic investors and NRI investors which would further speed up the growth of the sector. 
7. More Stability & Control: Anyone who has invested in the stock market knows it can fluctuate day-to-day. There’s much more volatility in the stock market because it’s impacted by a number of different economical factors and varying markets. On the other hand, the real estate market is much less vulnerable to significant fluctuations. Plus, real estate is a long-term investment, so short-term dropss in the market won’t affect the property’s overall profit. What can be the best example than COVID-19, on how real estate has more stability than stocks. When the Coronavirus hit in full force, we watched the stock market drop suddenly and a number of other markets and industries followed suit. The real estate market didn’t go entirely unhurt with the number of home sales declining dramatically since the declared pandemic. However, home values continued to rise per usual and home sales in many markets across the country have already rebounded. With the lowering interest rates again (~2%), people that are buying or refinancing homes are getting insanely low rates.
8. Tangible property: Unlike stocks that have no tangible worth, a real estate asset is there in the physical form which makes it a great tool to benefit from a variety of revenue streams. Further, real estate has no insurmountable financial obstacles and is simple to buy, quick to finance, offers tax benefits and improves one’s lifestyle.

Bottom Line

Real estate is a great way to diversify your investment portfolio. You can offset the risk of high-risk investments, such as money invested in the stock market. In addition, if you invest in rental homes, you can enjoy the cash flow while the home appreciates, giving you significant capital gains when you need it most in retirement.

Real estate can be a liquid asset if you need it to be. Don’t invest money you’d need immediately, but know that any money you have invested in properties you can usually liquidate within a few months if required. If you’re selling an investment property, Avenue Nest is an excellent resource for selling to other investors, moving properties fast and helping you reach your financial goals.