Future of Real Estate Investment in India
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Diversification of portfolio is the first rule of investment as it is insisted by
any ethical professional. Usually, not more than 30 per cent of available investment
funds should be assigned to any one category, including bonds, stocks and other
savings instruments form one leg of a many pronged platform. Direct commodity investment
is a very risky venture, but it is safe only for the experienced investor who has
time to monitor the market closely.
So what else is left there? For many investors, investment in real estate
is an essential part of a well-rounded portfolio.
Real estate offers a wide range of opportunities, if you want to include "paper"
in your investment scheme. Real Estate Investment Trusts (REITs), options, property
oriented mutual funds and other mortgage backed securities are present in disarray.
REITs are entities which invest in real estate related properties or assets that
include office buildings, hotels, shopping centers and mortgages secured by real
estate. REITs come into one of three categories. Equity REITs which invest in real
estate properties and make money for investors from the rents they receive. . Equity
REITs which invest in real estate properties and make money for investors from the
rents they receive. Mortgage REITs which lend money to developers and owners and
invest in financial instruments are secured by mortgages on real estate. Hybrid
REITs which are a combination of Equity and Mortgage REITs are also secured by mortgages
on real estate. To qualify for it, a company has to pay 90 per cent of its taxable
income every year to shareholders and invest at least 75 per cent of its properties
in real estate and generate 75 per cent or more of its gross income from investments
in and mortgages on real estate property.
Options are an alternative form of offer. A potential buyer provides a sum, an option
consideration, with the purpose of effectively take a property off the market for
a period of time. Option offers generally run anywhere between a few hundred and
a few thousand dollars, but possibilities exists for higher or lower amounts. Some
options bind one party only, some are called bilateral, both of which require adhering
to contractually specified conditions. Conditions involve contingencies around financing,
inspections and always have a time limit.
Every deal can be a little different and, of course, if the option isn't exercised
by the time limit specified, the potential buyer will forfeit the money. It is a
risky affair, but potentially rewarding because you have eliminated alternative
bidders effectively. The optioner has one advantage: the time to find a buyer for
the property itself, then selling the option. This helps you get rid of the need
to pay for transactions costs and keeps debt low, et cetera.
Summary: Going through history, buying and selling of real estate
property or long-term owning has proven one of the most profitable
activities, but there are least risky investments available. For starters, you must
be willing to get educated about the law and market. Try to make purchases while
minimizing costs like agent fees, interest rates, repairs, et cetera. Keep adequate
cash and other liquid assets which make you able to hold until the time selling
value is right.
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