Covid 19 has disrupted working of all major industrial sectors in India including real estate. However, the timely relief provided by the Government has retained the position of this sector as a promising one in terms of investment. A positive push given in the form of declaration of Covid as ‘Force Majeure’ has provided much needed relief to the realtors. More liquidity infused in the sector through extension of time limit for repayments have further created positive sentiment in this sector. Amidst all such changes, if someone wants to invest in real estate in India, here are some tips to consider.
- Close deals at rate below the replacement cost
Replacement cost is the cost of buying the land and building property on it. There will surely be some sellers who would be looking for buyers to minimise the losses arisen due to unsold inventory. So, the buyers can offer to buy such projects and raise rental income off these purchases.
- Lease out the property on terms of very slow escalation in price
The renters or lessees are willing to sign the deal with the property owners who have drafted very reasonable lease. Instead of 15% rise every three years, the 5% annual rise plan is something you can negotiate upon if looking for a property on lease.
- Avoid using leverage for buying assets with long lock-in periods
Every real estate inventory has a period of lock-in post which it starts paying back to the investor. Assets with long lock-in periods are to be avoided in the prevailing pandemic situation and related uncertainties. By renting out the property immediately, the interest and principal payment of the loan will be easy to set off.
- Go for the properties that are ready to move in or whose construction has completed
For investment in residential housing sector, under-construction projects should be avoided at this point of time. Investing in completed projects is going to prove to be the safe bet. In commercial space sector, too, buying ready to use offices should be considered. However, mostly, investment in commercial space is planned in order to earn rentals off it. With the ‘work from home’ becoming new normal, a big inventory of offices, if bought for self-use, will remain idle.
- Multinational tenants – a big market to enter
With multinational companies planning to come to India for setting manufacturing bases, the demand for office rentals will be on higher side. Such companies can invest in those rental properties whose rent value is quite small as compared to revenues planned from this cost center.
- Rental market – a new saving grace of Indian real estate
With the decline in purchasing power, Indian homebuyers are going to shift to rentals for quite some time now. Loss of jobs is surely going to create deficit in demand of property for sale. So, the rentals market, with its soft approach, would earn investors faster.
So, keep these tips under consideration if you are planning to invest in real estate in India in present times. The real estate investment in India during 2020 is still looking more promising alternative as compared to investing in risky avenues like shares and mutual funds.