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Real Estate Investment: Key Opportunity Areas For Investors In 2019

Joan Mathews Joan Mathews 07 June 2019

Investments in real estate have generally been a gold mine for most investors. In this article, we have identified some of the real estate investment opportunities that will allow one to reap bumper returns on investments.

Real Estate Investment

Investing in real estate presents an exciting opportunity for many investors. Unlike investment plans such as stocks and bonds, prospective real estate owners can use leverage to buy a property - part of the total cost can be paid up front, and then the balance, along with interest (if any), over a period of time. Now, although this segment has its own set of challenges, financial experts and investors are hopeful on the industrial investment front. Urbanization, rising income and economic growth are factors contributing to the increased demand for residential and commercial realty in the country. According to a report by IBEF, sectors like IT and ITeS, consulting, retail and e-commerce have registered high demand for office space in recent times.

India’s commercial office market is currently witnessing an upswing, and top developers are focusing on growing their portfolios, expecting high demand and good momentum in leasing. Last year, office space leasing was at a record high, crossing the 46 million square feet mark, according to a news report. This is an indication of growth in the corporate space usage. Many investors are reportedly exploring investment-ready assets in core office locations in Delhi-NCR, Mumbai, Bengaluru and Hyderabad. Flexible workplaces (co-working and business centres) in the country are also growing at a very fast pace. Going forward, this sector is expected to see strong growth trends, with many global players eyeing India as part of their global expansion plans. The co-working phenomenon is expected to expand into the tier 2 and 3 markets.

The warehousing and logistics sector are estimated to attract about $10 billion investments over the next couple of years, according to a news article by The Economic Times citing JLL India. Structured reforms like the implementation of Goods and Services Act, the creation of a Logistics Department under the Ministry of Commerce and Industry and a number of other policy changes have resulted in the growth of the sector. Warehousing space in eight top cities in the country have increased 22% y-o-y in 2018 to 169 mn sq. ft, the report by IBEF stated. CBRE South Asia Pvt. Ltd. has said that the overall space take-up in the logistics and warehousing sector crossed 24 million sq. ft. in 2018. It recorded a growth rate of over 40%, as compared to 2017. Rentals continued to appreciate in a number of micro-markets across cities in the country.

The residential real estate space has been in a lull recently on account of failed and delayed projects, putting many of the buyers off. Developers are facing the pinch as a result of the credit squeeze, as banks struggle with bad debts. While sales have slowly begun picking up, it will take a while for major price appreciation to start happening. Launches have come down drastically, with a number of under-construction projects getting stalled as a result of funding issues. On a positive note, the affordable segment has appeared to have spearheaded the residential growth last year. Meanwhile, private equity firms are sensing a big opportunity in this segment, diving in to purchase assets at attractive valuations. Although there are several challenges facing the traditional sector of housing, it still presents a good investment opportunity for institutional investment, particularly in the affordable and mid-priced segment.

Overall, investing in real estate - more specifically commercial estates - is definitely a good idea since it offers a unique combination of safety, steady cash flow and probability of high capital gains. Unlike the risk involved with inflation on investment plans like stocks or bonds, where the values can plummet, the same is not the case with real estate. Investments in real estate are considered as an excellent measure of hedging against inflation. Additionally, investing in property can generate an ongoing passive income, which in turn is a good long-term investment if the value of the real estate increases exponentially over time. Investors can even use it as a part of the overall strategy to begin building wealth.

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Joan Mathews
Written by Joan Mathews
Joan has over 4 years of experience writing for the BFSI industry. She enjoys watching mystery TV series, listening to 80s classics and spending time with her furbabies.