Real Estate Investment Basics.
It’s better to know the real estate investment basics before actually start investing it as part of portfolio. Looking back at early 2000 of Indian real estate, it was more of the unorganized sector. In the initial stage, the real estate was very cheap compared to the global market. It was less attractive due to the lack of cash inflow in the sector. As foreign investment started pouring in with new opportunities in, Indian growth story things changed forever, Since then it never looked back, the returns of the real estate sector from 2004 to 2012 were all-time high with a high valuation. As the valuation increased in comparison to the global market, the sector suddenly inaccessible to the middle-class segment. But one thing remained consistent, still, the majority of the sector is unorganized with more cash deals common at the ground level.
Different Catagories of Real Estate Investments.
The following are the different investment categories in the real estate sector.
- Residential ( Apartments, Villas )
- Commercial Real Estate( Malls & Shopping Centers, Hotels, Resorts, co-living, serviced apartments )
- Industrial ( Warehouses, Factories )
- Land (Commercial, Residential Plots)
Residential real estate
Residential real estate consists of apartments, villas, independent homes, co-living places. In India, the investment cash returns on the residential area are around 3%. Though the cash flow return is lower but appreciation around 8%.
Commercial real estate
Commercial real estate includes shopping malls, business complexes, co-working places, hotels, resorts, serviced apartments, high street commercial places, etc. The cash flow is higher than residential investment. It’s around 8%. With the growth in the economy, there is a huge demand for organized commercial real estate in the country in tier 1 and tier 2 cities.
Industrial real estate
The Industrial real estate sector includes Wear houses, Factory places. With boom in the e-commerce sector in the country there is a huge demand for warehouse places in tier 1 and tier 2 places.
The land is a very scarce asset class in India. The land sector includes residential plots, form lands and party places for outdoor functions. The return on land investment is comparatively higher than another sector.