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How Lucrative is Real Estate Investment

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Real estate falls under one of the major investment hubs that one looks for. At the same time a house, apartment or a property is a place to live in and is a life time investment of oneself with one’s life time savings as well. To sell the house that one lives in is often the last option that one has in search of liquidity. – PowerPoint PPT presentation

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Title: How Lucrative is Real Estate Investment


1
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
How Lucrative is Real Estate Investment
http//gruhakalyan.com
2
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
Real Estate Investment
  • Real estate falls under one of the major
    investment hubs that one looks for. At the same
    time a house, apartment or a property is a place
    to live in and is a life time investment of
    oneself with ones life time savings as well.
  • To sell the house that one lives in is often the
    last option that one has in search of liquidity. 
    In this stance let us evaluate real estate as an
    option of investment.

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3
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
  •  The house one lives is considered to be cash
    flow negative which means that instead of
    generating income and liquidity it requires money
    to maintain it.
  • If you talk about rent generating capacity it is
    actually half the amount of EMI that the house or
    a property generates. One may argue that the
    capital appreciation and the value is also there.
  • In case of land or any other assets like gold
    that is not there. You cant income keeping the
    asset to generate or increase in value at the
    same time.

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4
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
  • In case of properties bought on loan the catching
    up of the earnings over costs happen only when
    the loan amount is closed and the entire loan is
    repaid.
  • If you take an investment in a flat or an
    apartment from an income perspective this is
    perhaps what the situation turns out to be.
  • Let us suppose that you buy a 1000 sq. ft. of an
    apartment in one of the Tier II cities which will
    be around Rs. 2, 500 per sq. ft. This will lead
    to the house costing about Rs. 25, 00, 000.

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5
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
  • If you procure a loan of Rs. 20 lakhs which is 80
    percent of the amount and the loan tenure is for
    15 years the EMI that you have to pay is Rs.
    20,300.
  • But on contrast to that the rental price in these
    cities may even cross a limit of Rs. 10, 000
    which is virtually lesser than half of the EMI.  
  • If it is assumed that your rental income
    increases at a rate of 5 percent each year the
    rent will equal the EMI on the fourteenth year
    and the loan tenure is of 15 years.

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6
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
  • Another aspect that needs to be considered while
    calculating the income generating potential of a
    property is that any property has maintenance and
    especially the apartments which also grows year
    on year.
  • Thus considering all these it can be said that a
    fully paid property can only be an income
    generating asset and before that it is a
    liability.One thing that needs to be kept in mind
    is that the property does appreciate in value and
    that can only be used or encashed when the
    property is sold.
  • In common parlance the selling of the property is
    generally the last option that one has which one
    may have to do for liquidity.  But this is also
    true that capital appreciation is also a point of
    advantage and becomes a favourable factor when
    one obtains a loan on mortgage of a property.
     From this perspective capital appreciation is
    one of the positive factors that houses and
    apartments offer.

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7
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
  • This is also not true that the value of the
    properties only appreciates and they never
    depreciate. On the contrary the economic turmoil
    of the current times is because of the drop of
    the real estate prices on a global scale more
    than expectation.
  • Real estate does appreciate in prices but capital
    appreciation is of value when the property is
    sold.  The value can also be tapped by the
    mortgage of the property.
  • The house that we use for dwelling purpose is not
    able to generate income and it has a negative
    cash flow.Rent is a stable income but in most
    cases it is not the same as the EMI and much
    lesser but it is profitable only when the loan is
    closed or repaid.

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8
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
  •  But this is also true that capital appreciation
    is also a point of advantage and becomes a
    favourable factor when one obtains a loan on
    mortgage of a property.  From this perspective
    capital appreciation is one of the positive
    factors that houses and apartments offer.
  • The next comes the mid income segment of housing
    which is again driven by the IT and the ITeS
    sector employees.
  • But the west on the other hand has not been so
    successful in attracting high end realty
    apartments or villas mainly due to the
    infrastructure bottlenecks. This area is mainly
    the industrial hub of the town with of course
    many residential areas popping up in the last
    decade or so.

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9
Phone - 080 40155666, 8494 9301 72 Email -
contact_at_gruhakalyan.com
Property Buying Tips
  • Pre-launch Flats Vs. Ready-to-move Apartments
  • Now is the right time to buy a house or property
    in Bangalore 
  • How to buy a flat being Cautious to avoid
    Problems
  • Increase of Smaller Homes in Indian Realty Market

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