Benefits of investment in real estate in 2023

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Real Estate is the best investment anyone can make. If the happens to become a prime locality in a city , it can generate passive income for generations . It is a best way of attaining financial freedom. https://sidworld.in/5-ideas-for-financial-freedom/

Real estate
  1. Passive income- Real Estate is the best way to generate cash flows.

Generally, you will have to save some amount regularly in a high-risk asset like stocks or mutual funds for a long period of time, so that it can grow to a substantial amount and you can expect returns from it. Or you will have to start a business and automate it so that you can have regular cash flows.

But if you have a real estate property which you can rent out, then it has the potential to generate a fixed amount as passive income till you are the owner of the property. The income will depend on the location, means the place where your property is located.

2.Hedge against inflation- The real estate property acts as a hedge against inflation. Over a period of time the owner of the property also keeps on increasing the rent, whether it is a residential property or a commercial property https://cleartax.in/g/terms/commercial-property. In other words, as the inflation keeps on increasing, the rent also keeps on increasing. The owner of the property does not have to worry about the inflation if he has a property in a good location.

3.Leverage funds- If someone finds a real estate property attractive and wants to buy it, he can also buy it and get it financed from various banks. He has to pay only a small part and get it financed. He does not need to put whole money.

       The leverage facility can be molded in way to earn great returns.

Suppose a person buys a commercial property worth Rs.25 lakhs and gets 12 lakhs financed from bank. If his E.M.I. comes to Rs.10000 p.m. and he gets a rental income of Rs20000 p.m. then also it is a great deal for him. He is ultimately the owner of the property and the value of the property will keep on increasing over time.

4. Appreciation in value – The value of the property ,whether it is land or a house or a commercial property in the market, their value always keeps on appreciating over time. Because of the development happening all around the places, like roads, highways and markets , the value of the real estate keeps on increasing over time. The owner can also increase the rent if the area develops significantly.

For example the property prices in Noida. Before the development of Noida in 2000, nobody wanted to go there . In just 20 years, it has transformed so much that it has become one of the richest places in India and has become a software hub.Most of the state government runs in debt every year but Noida has a sulprus reserve . The property prices also are on a rising trend. The people who own property in this place, need not worry about their income because tey recieve so much of rental income.

5. Portfolio Diversification- Including real estate in portfolio helps in diversification of assests held by the person. It should be definately included besides investments in liquid assests like mutual funds, shares and fixed deposits. The investment portfolio of a person should always be diversified because each of the assets have different significance.

6. Long-term Security – It provides a long term security to the owner that the property will help him in bad times.Owning a piece of real estate whether residential or commercial always provides a sense of relief that the person has some assests as back -up for bad days compared to a person who has no assets anywhere.Once a person buys a good property like a shop in a mall or a plot besides a highway, their future as well as their children’s future becomes secure because property is as asset which keeps giving return in the form of rental income and the investment value of the property also keeps on increasing.

7.Direct control of investment- The property owner has direct control of the invetment in case of real estate compared to other investments like fixed deposits or mutual funds. In mutual fund ,shares are held in an indirect way. Similarly shares are owned by the founders who later decide to dilute the equity. But in real estate, the owner is in a direct control of their assets.

8.Anyone can become a real estate investor- Anybody above the age of 18 years can own a property in major countries. According to the Indian Majority Act,1875 and Indian Contract Act 1872,a minor below 18 years is not eligible to sign any document related to property transactions.

9. Build equity and wealth- When a person buys a residential flat or a commercial property even by taking a loan , he is buying a permanent asset .Once the loan is completed ,he gets the leverage to earn rental income from the property and reinvest money into building more assets.

10. Limited opportunities- Investing in real estate needs a good research and timing is also important.Suppose some construction work is going on in an area.But before construction ,the place is always less developed .Very limited people live there ,but when the place becomes developed after construction ,everybody wants to own a place (commercial or residential) there.But after development ,the property prices increase significantly and very few people can afford to buy in a developed society compared to the prices before development. Hence ,investors need to track good investments and also have their investment ready if they want to own a good property in a good location.

11. Tax benefits- Owning a property is also promoted by government by giving tax benefits.A person can claim tax deductions upto Rs.2 lakh on his home loan interest payment if the person buys a home for himself under Section 24 of the IT Act.There is one point to keep in mind that the property should not be sold before the end of 5 years of possession. For more details you can visit this website https://tax2win.in/guide/tax-saving-benefits-for-home-buyers.

about author

SIDDHARTH RAY

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My name is Siddharth Ray. I have worked in banking and insurance and now I have started my own agency for helping people taking the right investment decisions.You can contact me for investing in equity, mutual funds, life insurance, health insurance ,motor insurance and fixed deposits.

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