Over the past couple of years, one of India's fastest-growing industries has been the real estate industry. For PMAY houses, the Union Budget 2023–24 allocates Rs. 79,000 crore which is a rise of 66% from the previous year. A 10 crore limit was also suggested by FM for the section 54 and section 54F deduction from capital gains on investments in residential property. The overall capital expenditures (Capex) budget for the current fiscal year has been raised to INR 10 lakh crores, or around 3.3% of the total GDP, which will enhance housing demand and improve infrastructure in Tier 2 and Tier 3 cities. So, for investors who are looking to invest in real estate sectors in 2023 post Budget 2023 announcement, experts suggest these 3 things to remember before investing.
Mr Robin Chhabra, Founder and CEO of Dextrus Workspace
When it comes to real estate investing, one should always be cautious given that it is an immovable asset and is not very liquid. If you follow asset diversification as an investment principle then always consider no more than 25% of your savings in real estate. Being from the office space industry, one needs to have a long-term view when investing, especially when it comes to commercial real estate. Three things to always remember:
Invest in high-quality grade A assets: These assets have the right foundations, design and most importantly perspective in the market that helps keep demand for such properties high and hence rentals high as well. In Mumbai buying pre-leased assets can give consistent returns of 8%. The building you invest in should not be heavily stratified and sold to many investors as it makes managing the operations of the building difficult.
Look out for REITs: If you don't have enough money to buy an entire asset, REITs are great opportunities for investing money as they also give similar returns. We should see the launch of a couple of new REITs in Y2023 from reputed real estate developers.
Look for ESG-compliant buildings: The world is now moving hard on sustainability and we can get a sense that the winds are changing. Real Estate that has thought through sustainability since inception and in operations will be well poised for the future and they will see higher value returns much sooner than those that are not.
Hari Movva, Senior Vice President, SILA
Location: It is important to invest in a location that has the potential for appreciation, such as a city that is experiencing growth or a desirable neighbourhood. Gentrifying neighbourhoods experience a growth in market rates. An influx of new businesses or planned infrastructure development are key indicators of a real estate market poised for growth.
Research: Before making an investment, it is important to thoroughly research the property and the market to ensure that it is a good investment. This includes looking at factors such as clear title, the condition of the property, the demand for rental properties in the area, and the potential for appreciation. Part of the research process is also taking into account expert advice. Thoroughly check the documentation and if required hire a legal expert to establish a clear title. Real estate agents or brokers can provide valuable insights into the micro market and trends in the past years.
Financing: Consider how you will finance the purchase of the property, whether it be through a mortgage or other means. Make sure you have a solid understanding of the terms and conditions of any financing you may be using. Consult your financial advisor before making any large purchases.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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