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Is Real Estate Investment in India worth it? A Complete Guide for NRIs

If you are reading this, there is a strong possibility that you have made or are looking to invest in real estate in India. After all, buying a property is a great way to get stable returns in today’s time of uncertainty. 

According to Billionaire Andrew Carnegie, approximately 90 percent of the millionaires earned their wealth through real estate, which goes to show the potential of this investment option. To understand this, here is a comparison of real estate investment with some other investment options.

Table of Contents 

  • Why real estate over other investment options?
  • Real estate investment in India
  • Types of properties one should invest in
  • Will I get cheated by builders?
  • Final thoughts

Why real estate investment over other investment options such as stocks, FDs and bonds?

Investment options such as stocks, bonds, currencies, metals, and FDs are a great way to grow your money. However, none of these options provide the stability and guaranteed appreciation which a real estate investment in India can provide.

Real estate investment shouldnt be your only option though, it is recommended that your investment portfolio comprises real estate paired with some other investment options based on your short term and long term financial goals.

Now, what exactly is Real Estate Investing? Simply put, real estate investing is purchasing, owning, managing, renting, or selling real estate for profit. To understand why real estate over other options, lets look at some of its pros and cons.

Advantages of Real Estate Investment

  1. Passive Rental Income potential  The prime benefit of real estate is its potential in the long term. For instance, even if you own a property that has a rental yield of 4-6% percent, you will likely have a great return just from the rental income itself. Suppose you own a 2BHK property worth 65 Lacs near IT hub locations in Bangalore.

Here’s how much rental income you can potentially make

Bangalore Rental Income rates 2020

What does this mean? It means your property will fetch you an average of Rs 25,000 rupees each month, and your passive income will range between Rs 15 lacs – Rs 22 lacs within 5 years. Now, in a perfect world, suppose your property is always on rent, with some patience and price appreciation, you’ve got yourself a free property worth way more than your initial investment of Rs 65 Lacs!

2. Outrun inflation by miles

Unlike fixed deposits, real estate investments tend to outrun inflation by huge margins. It may not be as safe as fixed deposits, but the risk is worth the rewards. 

3. Higher cash flow potential 

A wise property investment generates dual-income: rental yield and resale value. Typically, these two incomes combined results in more profit than the single profit from FDs, metals, and currencies.

Drawbacks of Real Estate Investing

Everything has some flaws with real estate being no exception. Here are the cons-

  1. High capital requirements 

The setback in real estate is that it requires large capital whereas one can start investing in stocks with just 1000 rupees. However, you can not expect to get rich overnight by investing a mere 1000 rupees.

2. Liquidity 

Real estate properties are not the easiest to liquidate. It might not be the best option to redeem your money if you have an emergency.

You should always make investment decision based on your current goals, and you should always save easily liquidable emergency fund aside – regardless of the type of investment yo umake.

Is real estate investment in India still worth it?

Long story short, Yes! It is a still smart idea to invest in Indian real estate. Indian real estate has never let patient investors down. Sure, if you expect to buy a property and double the rate within a year, look else where. However, if you plan your strategy with a discounted deal, easily rentable property with an avg to high rental yield, location with 5-10% annual appreciation, you can reap rewards like nothing else.

To prove this point, let’s take a look at some statistics. ( Source: India Brand Equity Foundation / ibef.org )

  • Due to rising household income and increasing Urbanisation, the demand for residential properties in India has proliferated, placing India among the top 10 price appreciating housing markets internationally.
  • Across India’s top 30 cities, it is expected that the co-living market size will grow by more than double. In other words, its size will reach 13.92 billion US dollars by 2025 compared to the current size of 6.67 billion US dollars.
  • In 2019, over 6.6 billion US dollars were invested in Indian real estate. 
  • 40 million houses in rural areas and 20 million houses in urban areas are to be built by 2022 as per the Housing for All scheme.

Even if we ignore the statistics, real estate investment in India has an incredible appreciation potential simply because of the fast-growing population. Additionally, as of 2020, many top-tier International companies are looking to invest in India, which will create a boom in Indian real estate.

For that reason, If you invest in a small property on the outskirts of a city like Bangalore, Pune, or Hyderabad, it has the potential to become a gold mine in a few coming years. However, this does not translate that properties in other parts of India are unprofitable. Wherever you invest in a property in India, you are likely to get a good appreciation due to the rapidly increasing purchasing power of India.

Real estate investment in India can be an even smarter financial move if you know where to invest. If you don’t know where to invest, read our post on best cities to make real estate investment in India

Buying Plot vs Flat: Which is a better investment option?

Your goals when selecting a property are only two: minimum risk and maximum return potential.

Now, the type of property you should opt for solely depends on your goal. There are two groups of buyers in real estate. 

  • End-users of the property – people who want a place to live. 
  • Investors who buy properties solely for investment purposes. 

If you are an end-user of a property, you should look for a property that offers an array of amenities that could make your life easier and more comfortable.

Conversely, if you are looking to add real estate to your investment portfolio, you should look for properties that have a smart rental yield (min 3%) and can be sold quickly both in the short and long term. 

If your goal is investing or you want to park your money in a reliable asset, narrow your focus to the following types of properties-

  • Commercial spaces – New construction 

The commercial properties you should focus on include office, industrial, retail, and multifamily projects. These projects are considered one of the best real estate investments because these projects offer long term leases, which means higher ROI potential. Additionally, this sector has a lot of options to choose from and requires minimum management.   

So, if you prefer long-term leases and minimum management, commercial spaces can be your goto option. 

  • Under Construction apartments

Firstly, apartments are easier to sell when compared to other projects as the purchasing power of the middle class is at an all-time high and they prefer living in apartments, which makes apartments overall more lucrative.

Secondly, apartments that are under construction can be purchased at a comparatively lower price. This is because when apartments are already constructed their demand in the market goes high and hence their price. You can save up to 20 – 30% by purchasing apartments that are under construction. 

  • Ready to build Plots

Ready to build plots are a unique opportunity for investors. Typically, raw land is purchased for capital appreciation- to sell the plot at a higher price in the future. However, purchasing ready to build plots require two things. First, extensive market research to ensure that your property is not affected by market factors. Second, a trusted and reputed developers & sellers. 

A Golden tip:

In most cases, the recommendation is to invest in small properties rather than investing in large properties as small properties are in demand and can be resold easily. 

For that reason:

Some investors will purchase multiple 1BHK and 2BHK apartments instead of purchasing a 4BHK one.

Easily & Securely Invest in Real Estate via GlobalHome

Real estate investment in India involves a lot of hassle. Will I get cheated by a builder or seller?

First of all, we accept that both of these statements are a genuine concern. Real estate investment in India involves a lot of hassle especially for NRI because of the extensive paperwork. And yes, you can also get cheated if you are not cautious.

Globalhome was built with a clear mission: bring transparency and simplicity to cross-border real estate transactions. 

No, this is not a cheeky promotion, this is what describes us & this is what we do. 

Globalhome has developed a proprietary methodology to scientifically score thousands of under-construction properties & builders and then shortlist and rank the ones with the best ROI and reliability. 

Here’s how it works:

In the first step, we look at all the insights about the property, builder, locality, and  ROI. This is done to ease the decision-making process for you. Most online property portals only show you two things: amenities of the property and past projects of the builder. Sure this helps you shortlist some, but if you shortlisted 500 properties from 5000 properties, it means nothing. You are still nowhere close to finalizing a property. On the contrary, Getglobalhome allows you to get down to the 1 or 2 properties you would really buy. 

How we do it?

We have an extensive process that ranks properties based on multiple factors. Some factors that go into scoring are-

  • Detailed status of Project construction 
  • Profile of Builder or Developer
  • Financial standing of builder
  • Litigations
  • Locality Insights 
  • Pricing & Rent trends

How do we extract all this information?

There is plenty of data available on the RERA sites for each state, public land records, public litigation, user reviews, and pricing trends.

Ultimately, we are just leveraging data to bring transparency and simplicity in cross-border real estate transactions. 

To read and understand our complete methodology on purchasing properties in India, Click here. 

Final thoughts

Real estate is proven to be an outstanding investment option. It is way better than FDs and precious metals as it appreciates at exponential rates. It offers higher cash flow than stocks and is more sustainable in the long term. Real estate is just overall a smart investment option for you, for your retirement, and for your family.

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