Things to consider before making your first real estate investment

July 22, 2020: While investing in real estate sounds lucrative because of the returns, it is important to remember that real estate investment comes with certain risks.

Over the last few years, many people preferred living on rent rather than making a long-term investment in buying a home.

However, due to the pandemic, focus has moved back towards investing in real estate. Investment in real estate comes with the potential to grow in value over time, and the investment can also be utilized to earn regular rental income.

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While it looks easy for an investor with little or no experience to get involved in real estate transactions, it is also just as easy to get into real estate investments that offer no returns. Hence, as a beginner, there are certain things that you need to keep in mind.

1. Real Estate Regulatory Authority (RERA): Always check for whether the project is registered with RERA. Verify the RERA number and approvals online or through municipal authorities. Before zeroing down, check for hidden charges such as monthly maintenance charges. Also check for amenities such as security, social clubs, electricity supply, water charges, etc. It would be ideal to compare the market prices of other ready-to-move-in or under-construction projects, along with the brand value of the developer that you are looking to invest with. Poor infrastructure and cheap construction could cost you extra in the future.

2. Establish a budget. Always keep it within your loan re-payment capacity so that you do not compromise on your essential needs. Brokers usually persuade new investors to spend more stating that it would generate higher returns. Do not fall for the trap.

3. Long-term perspective: While choosing a location, if your investment is in a residential space, proximity to amenities like bus stops, malls, hospital, schools, should be looked at, as that will either benefit your family or increase your prospects of rental income. However, if you are investing in commercial spaces, proximity to airports, ports, warehouses, etc. will be beneficial. The location of a property is vital for the re-sale value that the investor will receive in the future.

4. Have a clear reason: It could be to earn rental income, own use, or investment re-sale value. etc. Having these points clear will help you decide on a property better. Depending on your reason, calculate return on investment over the short and long-term.

5. Know what’s available: For first time home buyers, there are attractive housing loan incentives offered by the government. House owners get interest rate benefits under the Pradhan Mantri Awaas Yojana. Additionally, there are tax benefits on home loan interest rate under Section 24 and on principal payment under Section 80C along with payments towards registration and stamp duty.

6. Compare interest rates and home loan features before choosing the lending institution. The PMAY benefits are offered across all major banks. Enquire about the transfer of loan options, as you could transfer your loan if you get a cheaper interest rate at another bank in the future. Click here to check for home loan eligibility.

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