Friday 15 April 2016

How investing today in Real Estate can give you great returns

Mark Twain once remarked, “Buy land, they’re not making it anymore.” In today’s scenario, this statement stands apt for real estate investors. There are several stories of apartments/properties from the 1950s which were bought for a few thousand rupees being sold in crores today. That is why, investment in real estate holds a prime importance in contemporary times as well.

Is real estate the best investment option compared to gold or equity shares or the evergreen fixed deposits? Let’s first define what is “real estate investment”?

 Real estate investment involves the buying, managing, renting and/or sale of real estate for profit. Improvement of property as part of an investment strategy is generally thought of to be a sub-specialty of investing called real estate development. Real estate is an asset form with limited liquidity and is considered to be highly cash flow dependent. 

  It’s a boom time for investors to invest in real estate because of the recent repo rate reduction (25% basis points) by The Reserve Bank of India. If you have been wondering how a repo rate cut effects you, it is a fair question indeed. It is the rate at which banks borrow from the central bank, the RBI, to meet their short-term (day-to-day) liquidity requirements.

 With the reduction, home loan rates are bound to fall and of course, the banks are happy. “It’s good time roll for home loan borrowers. Axis Bank taking the lead and cutting rates is a marked deviation from the past, when other leading banks such as HDFC Bank, SBI and ICICI Bank have been first movers. The sharp cut in deposit rates by Axis Bank in the past week, has helped the bank cut its lending rates faster.” – quotes The Business Line. 

 Mr Kaushal Jain, Director, Arihant Group talks about how Repo Rate Cut is going to benefit the buyer as well as the real estate industry as a whole. According to him, buyers can save around Rs 10,000 on a loan amount of Rs 50 Lakh. Sounds good? Watch the video below.

  Naturally, a fall in the interest rate prompts one to save less and spend more. Due to low interest rates, home loans will rise and this benefits consequently the real estate market. It is not advisable to keep saving your money in the bank when interest rates are low. This is because earnings on your FDs will be negligible at a time when economic activity is high as banks do not want to take the risk of raising funds at a high cost at a time when borrowing rates are falling.

  Residential real estate is one asset whose prices has risen in most markets of the country. Though analysts have predicted that the residential property market in locations such as the Delhi-NCR is ripe for a price correction, developers have been able to hold on to prices while buyers await a fall. Given the demand-supply imbalance, the trend is likely to continue and your investment will in all possibility stand good for you while other assets stand low. So, let your investments roll.

  What are your thoughts on investing in real estate market and Repo Rate reduction? Share with us.

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