In the long run, investing in real estate has the potential to yield returns that are very significant. A consistent cash flow is one of its potential benefits, along with a number of tax advantages. The following are just a few of the many benefits that investing in real estate can provide over other types of investments.
A reliable source of financial support
The demand for housing available for rent is increasing. In the second quarter of 2022, the Rental Index provided by Magicbricks reflects this tendency, which is caused by the opening of new workplaces. The demand for rental accommodation increased by 29.4% from the previous quarter and by 84.4% from the previous year in the April-June quarter, while average rentals increased by 8.4% from the previous quarter. It is anticipated that this demand will continue to grow over the next few years, which will make rental units a reliable source of revenue.
Investing in apartments for sale tulum can also be a useful strategy for mitigating the risk of incurring capital losses in the event that the purchasing power of one’s currency declines as a result of inflation or other major macroeconomic events. According to the data provided by the RBI, property prices in the major cities climbed by an average of 15.1% between 2011 and 2021, which is significantly more than the inflation rate, which averaged at 6.15% over this time period. In spite of setbacks such as the worldwide financial crisis that occurred in 2008, the implementation of RERA, the demonetization of currency, and the pandemic, the demand for real estate has significantly rebounded, which has brought renewed investor confidence in the sector.
The strength of the sector is demonstrated by the rise in aggregate demand across the 13 cities tracked by the index, which increased by 16.9% quarter over quarter and by 27.7% year over year. At the same time, average residential rates in these cities increased by 2.4% quarter over quarter and by 8.0% year over year.
Gives adequate liquidity
The use of real estate as collateral for loans is another option. The fact that loans against property (LAPs) are secured makes them more affordable than personal loans (which are unsecured) and makes it possible to borrow money for longer periods of time. The demand for LAPs is expected to increase at a compound annual growth rate (CAGR) of 14% by the time 2025-26 rolls around. In addition, there are financing options available in the form of reverse mortgages for older adults, which allow them to receive a loan against their property without having to give up ownership of it.
The market for real estate has always been considered a high-stakes investment, but recent years have seen significant shifts in the landscape. By the use of real estate investment trusts, investors can now take on a more manageable level of risk (REITs). Companies that own, manage, and generate revenue from real estate assets are known as real estate investment trusts (REITs). Because they are regulated by SEBI, provide liquidity due to the fact that they are publicly traded, and require as little as ‘300-400 a share, they are very popular. At this time, real estate investment trusts are only permitted to invest in commercial property; but, in the future, they may be permitted to invest in other assets as well, such as shopping centers, warehouses, industrial parks, and potentially even homes.
Leverage as a source of power
The fact that real estate investments can be financed through debt is one of the most significant benefits associated with making those investments. One can invest more than his or her existing net worth in real estate, in contrast to other types of assets such as bonds, mutual funds, or equities. The majority of lenders simply require a down payment of 20-30%. Aspiring investors now have a real possibility to realize their goals thanks to the leverage provided by property investments. In addition, the cost of this leverage is rather reasonable because, with interest rates ranging from 7-8%, home loans are among the most cost-effective forms of credit available. It is much better if the residence is occupied by the owners themselves or rented out to other people.
If an individual is in the tax bracket for 30% of their income, the tax savings on the interest lower the effective cost of the loan to just 5–6%. In a nutshell, the addition of real estate to an investment portfolio helps to diversify it and reduces the negative effects of holding volatile investments like stocks and equity funds. On the other hand, there are obstacles such as illiquidity and a lack of transparency. As a result, the significance of conducting research into a person’s past, performing adequate research, and shopping around for the best deal cannot be overstated. In order to make the best choice, purchasers should consult not just data reports but also genuine recommendations from industry experts.
