PROPERTY INVESTMENTS YIELD HIGH RETURNS

You can invest in property for both immediate rental returns and long-term wealth creation, says Vikas Agarwal

As economic conditions improve globally, the cheer is coming back into the property market. Analysts believe it is a good time for those looking at investing in property, both residential for own use as well as from an investment perspective. Investments in property bring diversification to an investor’s investment portfolio. Historically, it has been proved that a property investment is a lowrisk option with high returns over a long term.

Usually, price volatility is quite low in the property market. Due to the global recession, property prices corrected in the recent past. As the global economic conditions are improving, the demand in the property market has increased. The property prices have begun to show signs of appreciation. Therefore, it is a good time to go in for property.

Investments in property offer short-term returns in terms of rental income and long-term returns in terms of capital gains. Therefore, it is suitable from a short-term as well as long-term perspective. Property adds to the long-term wealth creation goal of an individual. The government also provides income tax exemptions for those invested in residential property.

In general, investments in property require a significant upfront investment. Therefore, it is important to plan well while entering into a property investment. Location and price of the property are the two most important factors that pretty much decide the returns from the property investment. A property investment in an upcoming area gives the best returns over time.

Here are some options available for investors:

Residential property

Investors who do not have a house of their own should first look at buying a residential property. There are many sops available for investors buying a residential property, especially the first residential property. The government gives an income tax exemption on interest paid against a housing loan, to a maximum of Rs 1.5 lakhs per year. Also, investors can claim a rebate in income tax on the principal repaid, to a maximum of Rs 1 lakh.

The government is planning to increase the limits of these exemptions in the new tax code. In addition to these, attractive housing loan schemes are available in the market and the interest rates on housing loans are lower than the interest rates on other borrowings.

Site

A site is good for those who can keep a regular watch on it. An investment in a site requires relatively more attention at the time of purchase. The percentage returns on sites at good locations is mostly higher than other options. The value of a site in developing areas has appreciated many times over the last few years.

Commercial property

A commercial property is a good investment for those looking at high rental income and capital appreciation over a long run. The price of commercial property is quite high. However, commercial property in a prime location has the potential to earn 10 to 12 percent returns in terms rental income.

Perspective

There are two avenues in property investments - buying a house to live in and an investment for capital appreciation. Buying a house to live in should be done as early as possible as it saves tax, and creates long-term wealth.

An investment for rental returns and capital appreciation should be planned well. It helps in portfolio diversification.

Courtesy:- TOI dt:- 17-10-09