July 24, 2024

Most people are hesitant about investing in real estate because, they think investing in real estate can be daunting. Many people haven’t learned about this type of investment. We’ve been taught that loans are bad, but why? It’s a common misconception that paying money to others is a loss. But why? Why don’t they realize their salary is also an expense to someone else? Somebody’s expenditure is someone else’s income. This thinking might be inherited. Let’s challenge it. Some investments require loans, like real estate or large businesses. Individuals can’t always raise the necessary funds. There’s nothing wrong with borrowing from banks or financial institutions, especially when you pay interest. Let’s try to change this thinking and think differently. Let’s shift our perspective. Start by reading my blog “Eight Facts About Any Type of Investment.” It outlines key considerations for any investment. Then, explore the ‘seven homework steps to take before buying real estate’. Finally, we’ll learn an advantage of real estate investing and how to make real estate investments profitable in this blog. 1) Under construction Property The best strategy is to buy under-construction property from a reputable builder. This reduces the risk of project delays. As the building nears possession, your investment appreciates. If you choose a CLP (construction link plan), your initial interest cost is lower. How CLP Works An investor pays a downpayment as a booking amount. Then they proceed with property registration. Investors pay for taxes and charges like stamp duty, registration fee, TDS, and advocate fees. As the developer completes each slab, they demand further payments for the work done. This is called the Construction Linked Payment Plan (CLP). You only pay the EMI for the disbursed amount. So, the interest is charged only on that amount, making it lower than paying the full property cost upfront. In the first year, you may pay 50-60% of the total cost. The next year, you pay 20-30% more. In the third year, you pay the remaining 10-20%. If you take a loan of Rs.10,000,000 at 8.60% p.a., you pay a maximum interest of Rs.15,00,000 in three years. Advantages and Disadvantages of Under Construction Property Disadvantages Advantages Note on Market Trends Real estate trends can change. As of 23rd July 2024, the Union Finance Ministry of India increased long-term capital gain tax from 10% to 12.5%, removing the indexation benefit. This can impact investment returns. Always study and seek expert advice before buying under-construction property. 2) Don’t be emotionally attached Never be emotional when buying or selling property. Indians often have special attachments to their homes. This can be due to ancestral ties, first property sentiments, or childhood memories. Before getting emotionally attached, think about the property’s significant advantage. When be emotional – Losses on being emotional – Other Expenses: Unnecessarily keeping property incurs costs like maintenance, electricity bills, breakage losses, and property taxes. 3) Buying two properties As per my opinion, buying two such prime properties at a time or simultaneously with little time gap is worth. How and why? Who will incur interest cost and taxes? Let’s understand and challenge the fear and traditional thinking; by following these steps – Disclaimer and Notes