[pavanmadhini]

Having invested in multiple flats over the past few years, I'd suggest you to look at a flat purchase with the following considerations:

1. Committing to a home loan made me save a much higher % of my salary. I was not very disciplined with my finances till I got into real estate.
2. The rental yield should be calculated on total cash outflow at that point of time rather than the total price you will eventually end up paying over 10/20 years. This is coming out to be 6-9% for me.
3. As with any asset class, the quality of selection matters - some MFs will outperform others, some flats will outperform others. I personally look for upcoming IT office spaces which will lead to high earning migrants soon. If there is a limited supply of residential projects in that area, even better.
4. Model it out - put an excel sheet with rental projections for the next 10 years. Replicate with a 3%, 6%, 9% YoY capital appreciation for the total value of the flat. This will give you a lot of clarity on the spectrum of outcomes possible.
5. Eventually, in my humble opinion, real estate is a low risk, moderate return, long term asset class which hedges and valances my other high risk high return investments.

If you have the time and inclination, I'd strongly suggest reading The Psychology of Money. Will surely help with not just this decision but other financial decisions you'd take over time.

Hope this helps.

[charanreddy]

My 2 cents. I have recently ( late in my career) started investing in SIPs and MFs and own a house
That I currently live in.

Things to consider while investing in MFs are relatively straight forward , as the risk of investment evaporating overnight is almost zero, unless you invest in stocks directly like a YES bank.

In, real estate the risk is relatively high. The property in construction could be delayed or not completed. It could be subject to litigation. Real estate investment needs careful planning and if all things go right, it could easily beat MF returns. I would say, only if you can find these pearls in the ocean of opportunities should you go ahead. Let’s not even discuss rental retuns. Savings bank interest is much better. So only get into real estate for appreciation and that too if you confident if you have found the ‘pearl’

[PrasunBannerjee]

Originally Posted by SmartCat

REITs are a good idea. It is equivalent to buying commercial property with a couple of mouse button clicks. Gives you the best of both worlds - stocks & real estate.

Stock code for REITs listed on NSE:

EMBASSY-RR (Bangalore folks, if you want to own a part of Manyata Tech Park, buy Embassy REIT! )
MINDSPACE-RR
BIRET-RR

Hey SmartCat and other esteemed members, sorry to hijack this thread and going offtopic, just wanted a clearer idea on exactly 'how' does one invest in REIT. Does one buy stocks of the ones you mentioned above like regular stocks? Or buy SIP/lump sum into some mutual fund, etc.

There clearly is some lack of clarity/knowledge material when it comes to REIT in India for common folks not much active in investing/finance scene.

[hondafanboy]

You seem to be doing quite well in terms of career, investing etc. and since you are considering this flat from an investment and diversification point of view, I suggest to see if the following can be considered

1. Reduce the overall purchase cost from 1.1 to between 70-80
2. Look for the specious 1 or 2bhk
3. Look at some resale properties at that price bracket.

[itsmejack]

Originally Posted by PrasunBannerjee

Hey SmartCat and other esteemed members, sorry to hijack this thread and going offtopic, just wanted a clearer idea on exactly 'how' does one invest in REIT. Does one buy stocks of the ones you mentioned above like regular stocks? Or buy SIP/lump sum into some mutual fund, etc.

There clearly is some lack of clarity/knowledge material when it comes to REIT in India for common folks not much active in investing/finance scene.

If you have a demat account, you can search for BIRET, MINDSPACE, EMBASSY and buy any of these REITs. These are traded just like any other stocks.

[jeetumg27]

I am no financial advisor, but from whatever my research shows, Real Estate has never yielded the same return as Equity in the long term. Why Real Estate “looks” like an attractive option is ;
- Emotional (having a property of your own)
- Tangible asset (you can see touch experience it which you don’t do with Equity)
- Past stories we have heard about long term appreciation

The road of equity investment might not be a straight one, but you have to take an approach or invest it & forget it for a while, especially with Index funds (passive investing).

For diversification purposes, I would suggest to diversify or balance between Equity & Debt and not consider real estate at this stage. Property maintenance, taxes, finding good rentals consistently, brokerage etc. are all hidden costs that eat up a fair chunk of the value that asset generates. Also, in the current scenario, it’s best to stay away from properties under construction, however good or well known the developer may be.

Also, you mentioned LIC’s - which in my opinion, generally offer the worst of both worlds of investment & insurance. Shifting to a term insurance policy alone can potentially free up a lot of premium money that you might be spending on LIC.

There are some good FEE-Only financial planners who are unbiased & don’t work on commission basis. I would suggest to meet one & then take a decision. But do keep us posted on what you finally decide it would be helpful for the community I believe. Thank you 😊

[AROO7]

Don't buy the property as you would be blocking a huge sum of money for a long period. Getting a tenant and maintaining the property is another headache and needs some part of your time. Instead, try diversifying in your particular investments (if not done already). For e.g.- In mutual funds, you can have exposure to U.S. stocks and Chinese stocks both via an Index or a Flexi cap fund. While going for foreign investments focus your investments in developing economies.

If you are already over it then start looking for monopolies in the stock market either government sectors or private and park your extra money there. Plus at your level of investing, I don't think there is a need to explain the long-term benefit of such stocks or dividend investing in general.

As for real estate, I totally agree with BHPian SmartCat's suggestion about going for the RIETS. After you have exhausted all these options then park the rest of your money in some liquid fund as well. The above perspective is so because of two things first you are going to welcome a baby in your house plus your Dad will be retiring from his business. You need to have investments in instruments where liquidity is high so in case of an emergency you are not left high and dry.

[sudanmohit]

Hi jigar
I'm not a financial expert at all rather I'm on the other end of spectrum and I'm 44 yrs old so i can tell you what I would not do in your condition

Why an under construction flat? It may take forever to complete (we all know about horror stories of Delhi NCR, Bombay etc builders). Then comes maintenance cost per year. If at all you want to invest in real estate, please go for a ready to move flat or even better a small commercial shop.
They'll give you chance of immediate rent. Less maintenance owing to smaill area and more appreciation possibility.

Otherwise mutual funds sip etc are always there.

Do keep in mind the possible emergencies like health, natural issues, professional ups and downs etc.

Kids can be very demanding monetarily.

Best of luck to whatever you plan for

[nvldvr]

I personally feel that real estate should not be seen as an investment Avenue. One should invest in only a property that one intends to keep for his personal use.

Excess availability of flats presently in all our cities, and the resultant low rental incomes, do not render real estate a wise investment Avenue at all.

Couple this with the fact that 15-20 years down the line, it would be very hard to sell off the flat bought now, due to its age and availability of better/ newer options for the buyers at that point of time.

[Miyata]

For ones own living, it makes sense to just buy a decent place and not have to deal with idiosyncrasies of another home-owner - what price can one put for peace of mind!

For investing purposes, in most instances it doesn't make much sense. On due diligence and quantification, one may find lower returns that's lowered further with continuous inputs in the form of many maintenance hassles, low liquidity, and many other issues.

Possibly the one instance it would make sense is for those that may be in it for reasons associated with black-money!

[SmartCat]

Originally Posted by PrasunBannerjee

Does one buy stocks of the ones you mentioned above like regular stocks?

I have mentioned the scrip code in my previous post. Type that in your stock broker platform and then buy/sell.

There clearly is some lack of clarity/knowledge material when it comes to REIT in India for common folks not much active in investing/finance scene.

Adding few more points to clear things up, here are the differences between Real Estate Investment Trust (Embassy, Mindspace etc) and Real Estate Stock (like DLF or Oberoi Realty or Godrej Properties):

- Real estate companies like DLF show "sales of projects" as revenue. REIT shows "rental income" as revenues.

- Revenues of real estate stocks is not stable. Sales can fall 50% during a bad year. REIT revenue is stable because customers (mostly IT companies) do not change their addresses very often.

- By regulation, REIT is supposed to payout 80% of cash flows as dividends. So income is guaranteed (a bit like property's rental income) as long as the REIT's properties have been rented out.

You can read investor presentation on respective REIT websites:
https://www.mindspacereit.com/
https://www.embassyofficeparks.com/
https://www.brookfieldindiareit.in/

[Abhi83]

Hi,

Great reading the opinions on REIT and other options..
A decade ago, after some windfall gains my father invested in a number of properties and now we sold most of the flats at almost the purchase prices or negligible profit. You cannot even think of opportunity/interest loss else would be pushed into depression...
Only properties that increased in value were land assets. They multiplied several folds and covered the flat losses. So my suggestion would be to look for plots in developing areas or near colleges that can be left as it is or may be made as a hostel at a later date. The land would surely increase in value else a hostel would give much higher returns...
I'm also currently exploring options in warehousing sector and looking for some good rental yields...

Best Wishes.

[itwasntme]

Originally Posted by androdev

I used to live in a rented house, I taught my landlord about stock market, now we both live in a rented house.

Well said . It can go catastrophically bad like in say Paytm when you invest a lot and get full subscription at 40% lower.

[emmenhr]

Reservations :
1. Will investing in a property by reducing monthly SIP outflow a good option to diversify my savings bucket? Investment horizon - 25 years. As and when I see an increase in my income, I'll accordingly raise my SIP commitments.
2. Experienced folks/elders are of the opinion to invest more in stock markets as Real Estate will not be growing as much as stock market will.

Is it wise to go for the plunge? Are my corrections of any sense for us, salaried income folks?[/quote]
Jigarbhai, my two bits on this :
1. Please please, do not reduce your SIP if you can afford it. SIP's will give you the most optimum returns over a period of time after riding through all the ups & downs of the stock market.
2. 5 to 10 years back, it would have made some sense to invest in residential property for good returns (monthly rent & capital appreciation). That is no longer the case. Residential returns are hardly 3 to 3.5 % pa and add to the misery is absolutely no capital appreciation (I am stuck with property in bangalore giving me less than 3%, which i invested in 2016, got possession in 2019 and currently rented out). Even the saner logic of investing in under construction property does not hold good now. When I researched this in details, the reasons are very clear - gen next do not believe in buying houses / cars; more supply in the market, developers charging exorbitantly psqft, less job security leading to concerns on higher loans thereby leading to less demand. If you are inclined to Real Estate, better to invest in commercial property after researching about the developer - it may still give you between 6 to 8 % returns pa.
It is always better to spread your investments - SIP, pure equity, debt funds, Fixed deposits, Gold/Silver (enough ETF in the market now), Commercial Property etc.
Happy Investing &may your investments grow.
Cheers
Krish

[OffRoadFun]

In my opinion, real estate had its charm, may be some time back, not anymore definitely. It will continue to underperform stocks for reasons like increasing digitization, awareness about stocks and tighter control on cash by government.

Age of 31 is young.
TL;DR: Forget about real estate, put all the lumpsum in SWP and rest of the EMIs planned in SIP, do it with DISCIPLINE for 15-20 years without FAIL and you will be much richer and will thank me!

Coming from someone who bought a house during downturn of 2009 at what I thought was a good deal (it indeed was) in heart of IT corridor in Bangalore, the returns are not outstanding. Last checked, it was heading close to (and below) 10% per annum return compounded. Not bad. A reverse calculation showed if I had just put the same money lumpsum in even NSE 50 would have left me with MUCH more cash in hand today than the worth of the house today!

Keep a few things in mind for SIPs:
1. Stock market returns are invariably higher even with index funds for those who are DISCIPLINED over medium to long term (8+ years)
2. It can be shown from the data that adjusted return over 7+ years for any index will beat any other asset class like bonds, REITs etc.

Read the book "stocks for the long term" by Jeremy Siegel, soft copy available.

Real estate is a good asset if invested in plots probably but flats may not return much.