Is buying a home for secondary rental income advisable in current situation?
Targeting IT sector
Would like to know why people are saying NO. The only way to weather a recession (which seems like it will get worse before it gets better) and save long term capital erosion is to buy assets. Real Estate in a tier-1 market is just that. With banks failing, where do you plan to keep your money?
In India it's now being seen as a risk and unnecessary trouble. Real estate as a safe investment was a thing in the 1980s, today you can't guarantee whether a project will be completed on time, require legal recourse to get to completion or with the soon to come downturn in population growth, will urbanisation continue at the same pace.
You also run the risk of being largely illiquid - an issue that left many people at the financial brink during covid.
In the end it's up to each individual's appetite for what to invest in.
Buy in a completed project. Property rates have gone 10x in big cities in last 20 years. 1980s meh toh my half the city didn't even exist 😂. And population downturn will start in 2040s and will show effects only in 2060. Tabtak toh most of us will be gg.
It is simple, say you invest 100L in residential real estate. You will likely earn a rental income of 2.5 to 3.0L p.a. ie 2.5-3%. In a city like Mumbai, ratio of rental to asset price could be lower still . The rental income will also not rise more than 5% p a. (below inflation) Instead, if you put that 100L into a good equity mutual fund you can safely expect to earn an average return of 10-15L Stock markets are volatile year to year but not over a 10-15 year period that will see the Indian stock market capitalisation rise to become the 3rd largest in the world . Unlike in the past the rate of capital appreciation has also significantly declined and is below inflation rate.
You can make good returns in real estate but only provided you have carefully assessed and selected the right micro market..
None of this math works when you're laid off and you're living on rent. The price of property also increases yoy and value of rental yield of 3-5% also increases.
In case of emergencies, You'll need money in case of emergencies and most likely in an economic downturn then the market is down and your assumed cagr of 12-15% will be around 9%.
In India, cost of survival is still ok if you have your own house.
Sadly the price of property has generally been increasing at a lower than inflation rate in all top 6 cities over the last 13 years..If you had a 1 Cr to invest in mutual funds instead of the property, that could have got you 4 lakhs to spend on rent and another 10 lakhs to tide over difficult times like being laid off. Market might be down for two years at best but you should think (long-term 10 years horizon) my friend.
Makes sense in Bangalore, Mumbai, may be Gurgaon. Other cities won’t fetch much rental income and you’ll keep putting in money for EMIs.
Ofc property valuation will increase and you’ll feel the difference when you retain the property for 5-10 years.
I have an additional flats in
Scenario in Noida: Bought it at 35L in 2010, current valuation approx 52L, rent 12k per month.
Scenario in BLR: Bought it at 62L in 2015, current valuation approx 88L, rent 30k per month.
However, managing both is a task and requires a fair bit of effort. Property management services help, but their compensation also eats up into the income.
I’m now looking to invest in commercial real estate, fast moving inventory, small shops etc.
Invest in Trivandrum,,faster growth,less investment needed,
