Building Wealth From Real Estate: A Guideline On How To Maximise Your Returns

As per the India Brand Equity Foundation, by 2040, the real estate market will surge to Rs 65,000 crore ($9.30 billion) from Rs 12,000 crore ($1.72 billion) in 2019

Buy and hold is about an investor buying and holding the property for a long period regardless of fluctuations in the market. 

Source : Unsplash

By Amar Shah

Real estate is considered to be one of the safest investments conventionally. While it offers passive income, great returns, and tax benefits, it is an opportunity to create assets. As per the India Brand Equity Foundation, by 2040, the real estate market will surge to Rs 65,000 crore ($9.30 billion) from Rs 12,000 crore ($1.72 billion) in 2019. Additionally, the sector is expected to reach $1 trillion in market size by 2030, up from $200 billion in 2021, and contribute 13 per cent to the country’s GDP by 2025. 

Overall, the market is projected to grow to $5.8 trillion by 2047, influencing 15.5 per cent of the GDP from an existing share of 7.3 per cent. These striking figures indicate an uptick in real estate and truly paint a promising picture. 

Thus, it is anticipatable why several people opt to invest in real estate. It simply translates into a clear-cut avenue to build wealth, often becoming a symbol of personal ambition for many. Interestingly, a large part of the Indian population considers real estate as a sturdy choice for building wealth in the long run.

How To Invest In Real Estate Market?

Many people rely on the 50/30/20 rule for income classification. This is an easily understood method that categorises income into needs, wants, and savings. According to the method, 50 per cent is for expenses necessary for survival and basic well-being. Next, 30 per cent is dedicated to recreation, and finally, 20 per cent accounts for savings and investments. While the base amounts may vary from person to person, this basic rule offers a respectable model to navigate the financial sphere. 

How To Build Wealth In Real Estate?

So, if you are wondering what’s the mantra for building wealth in the real estate sector? Some approaches include: property appreciation, rental income, leverage, tax benefits, and buy and hold. 

Property appreciation is studying the property to evaluate its growth potential in time. Rental income means purchasing homes to generate rent from tenants. While it is one of the most common methods to make profits, investments made in commercial properties and second-home properties can yield up to 10 per cent or higher annually. 

Leverage is a device for a real estate investor looking to maximise their returns and wealth accumulation. It refers to the use of borrowed capital to increase the potential return on investment. 

Tax benefits include interest on mortgage payments, property taxes, and certain property management expenses that can be tax deductible. Buy and hold is about an investor buying and holding the property for a long period regardless of fluctuations in the market. 

Conclusively, an investment in real estate promises a steady return over time. In about 5 year horizon, it is certain to give an IRR from 18 to 22 per cent. Besides, real estate gives an investor complete control of the asset and makes for a low-risk proposition along with massive growth potential. 

(The author is the Co-founder of Golden Abodes.)

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