The bias and preferences of investment in real estate

One asset that is not renewable ever is land. Wars have been fought, brothers turned into foes, father and sons killed each other and for what? Land. The decade of the 2000s has brought in unbridled prosperity both to landowners and investors. The boom in real estate has coincided with the increasing disposable income in the hands of Indians. Have money, will spend is the new motto of generation Gen Y.

Apartments that were typically bought at the fag end of one's working career are now being bought by people in their 30s. Investors having multiple properties even before they have reached 40 is a common occurrence. And to fuel this demand, home loans can be availed easily.

Real estate in your portfolio

One's real estate investment portfolio needs a look from the broader perspective. Owning a flat or flats or multiple plots does not make your portfolio. With the phenomenal returns being generated in the last decade, the moot point for the new investor is whether the momentum in growth would sustain. There is no right answer for this and to forecast is to perish.

However, there is a method to this. Before investing in real estate for the first time, do check the reputation of the developer in delivering projects on schedule. Also check the location of the project, like whether it is near your office or children's school. Do check the project cost and the monthly equated monthly instalment (EMI) you will have to pay. Do note that if you are paying rent and also paying an EMI, getting the delivery on schedule should be of paramount importance. However, most of the time, the scheduled delivery goes way off target, which only adds to your financial cost and your mental stress.

The EMI payout should not be more than 40% of your net take-home income. And in the event you are paying rent on top of it, the net payout (EMI + rent) should not be more than 50-55% of your net income. Though you may have to pay a premium, try to get a flat that is scheduled to be delivered for possession in 6-9 months. This would ensure that you do not continue to pay rent as well as EMI for a longer duration of time.

... contd.

ALSO READ

Budget sops spur hopes of buying that dream house

Aviva Life Insurance launches i-Shield, Tata AIA offers term plan

Keep investment documents handy to claim tax deduction

One size fits all