Can real estate investment be a profitable bet?

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There is a famous saying that everything is not always sunshine and rainbows. Likewise, not every investment option comes with high-return and low-risk combinations. Therefore, finding the right product becomes a daunting task. In reality, risk and returns go hand-in-hand. But there are options available where money if parked wisely, investors could generate higher returns than what they get from putting money in any traditional investment tool. One such investment could be in the real estate sector. The real estate sector in India is one of the favourite destinations for many to get handsome returns. In particular, real estate investments have long been viewed as a hedge against inflation.

After all, the ultimate goal for any investor is to maximise returns while going for risk mitigation at the same time. The very first step an investor opts for is to figure out the right investment that fits the profile and needs. The real estate sector is a promising place that is considered the safest option for parking money. Besides promising to create an asset, it secures the future by multiplying the wealth. Investors get certain distinct advantages when they buy a property. The sector is divided into four sub-sectors -- housing, retail, hospitality and commercial. In India, the construction industry is one of the major sectors that drive the economy. It is also the second-highest employment generator, after agrarian. This makes the growth in real estate well complemented given that there has been a continuous increase in the demand for properties across the length and the breadth of the country.

According to rating agency ICRA, growth in the real estate sector will continue to expand over time. The market size is expected to reach $1 trillion by 2030. Deepak Khandelwal, Principal Partner of Square Yards, the country's largest integrated platform for real estate and mortgages, said that the economic boom and incentives being offered to customers make buying properties a profitable investment. He said that owing to its low-risk, high-return archetypal nature, the sector has weathered all the hurdles to instil confidence in investors to strike jackpots rather than indulging in the cocktail of uncertainty presented by other investment tools.

"Real estate over time suffers less wealth erosion owing to its tangible nature, irrespective of the market forces at play, and can be transferred to succeeding generations, enabling your progeny to have a bright and secure future. Owning a real estate property can unlock opportunities of a stable and regular monthly rental income that will keep increasing over time, along with the capital value of the property," he said.

Other factors that attract investors are the reduced interest rates, stamp duty cuts, stable property prices and attractive pre-payment plans. Data released by CRIF High Mark, an RBI-approved credit bureau, show a rebound in the retail home loan market despite some weaknesses due to the pandemic. It said that the sector will continue to grow significantly with the remote working concept gripping its roots. Notably, there has been a robust demand for high-priced properties that can serve as catch-all compounds, live-work spaces and offer a resort-like living experience, catching the attention of real estate developers.

Anand Sharma, Founder & Partner, Design Forum International, said that the sector has come a long way to become the favourite destination for investors, adding that real estate investment now is a prudent decision. A recent study conducted by the United Nations noted that around 60 crores of the country’s population will be residing in urban areas by 2030. Thus, the demand for housing and other allied developments will continue.

"The industry has witnessed an increasing demand in the housing sector in recent years; sales velocity gathered momentum owing to record-low interest rates offered from developers, stamp duty reduction and renewed interest among homebuyers for relatively bigger and comfortable homes," Sharma added.

Besides, another positive aspect of owning a home is that the person gets an intrinsic level of emotional fulfilment and happiness. Even investing in a small apartment or commercial property will generate a handsome profit, either by rental income or through reselling after a certain period by booking a good profit margin.

(Disclaimer: This article is only for general information purposes only. Readers/Investors are advised to seek experts' advice before buying a property.)