Investment in real estate always attract many investors, but since last 5 yrs not giving much return. And the main problem is a huge investment is required while the property can not be sold easily when required. But still, real estate investment attracts us.
So, what are the other ways in which we can invest in the real estate even with a small amount?
1. Investment in Real Estate Investment Trust (REIT)
The emerging investment avenue is REITs. Very much popular globally but in India, it is emerging. In March 2019 the first IPO of The Embassy Office Parks REIT came. REITs are very much similar to Mutual Funds. The difference is in Mutual Fund our investment amount is invested in shares, bonds or gold while in REITs our investment amount is invested in income-generating physical real estate. REIT investor is allotted units which are traded freely on the exchange once listed. REIT investor gets the return in the form of dividend, interest or rent as well as gains arising due to the capital appreciation of underlying property. SEBI reduced the minimum investment limit in REIT to Rs.50,000, so this is really attractive as well as a flexible investment product in which you can invest small amount also.
However, in India, this is still a less explored investment product. So, before investment should also remain aware of its risk factors as well as tax compliances. As dividend is taxfree in the hands of investor but interest/rent income will be taxable.
2. Investment in Real Estate Mutual Funds:
These mutual funds invest investor’s money mainly in the stocks, bonds of real estate company. Return is mainly in the form of dividend and gain arising due to the Mutual Fund’s Net Asset Value appreciation. By investing in technically sound real estate mutual fund also the investor can get the benefit of increasing returns of the real estate companies
3. Direct Investment in Equity of Real Estate Companies
If you have done a thorough analysis and also know about the management as well as debt ( Loans) profile of the company which is involved in commercial real estate development or hotels – resorts development, direct investment in equity can be made. You can start with small and regular investments and get the return in the form of dividend and appreciation in the market price of the shares. However thorough analysis is very much required before direct investment. Tax burden and service charges will be less in this case as compared to investment in the mutual fund.