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How to evaluate Investment in Real Estate

This will not include self-occupied house because that is not an Investment. The reasons are fairly simple. Will you sell your house if it appreciates more in value? Chances are that you won’t. So you will not be realizing your paper profits anytime soon. Even if you were to sell this house, you will need to purchase another one. So money goes from one locked investment to another. Thus, Investment in Real Estate Property is made with the intention to earn regular cash flow in terms of rent and long term capital gain as value of property keep on appreciating due to change in market dynamics and demand supply equation in that segment & area.

Real estate sector is one of the most globally recognized sectors for Investment. It comprises of following sub sectors:

Ø Housing: Bungalows, Apartments, Affordable Housing, Tenanted (Pagdi), Weekend Homes

Ø Redevelopment of old Buildings mainly in Metros & major cities facing shortage of Land Parcels and potential of extracting much higher FSIs

Ø Retail: Shops, Malls, Markets, Convenient stores.

Ø Hospitality: Hotels, Hospitals, Resorts, Time Share Vilas & hotels

Ø Commercial: Offices, Co-share Offices

Ø Industrial: Small units for MSME, Industrial Estates, Workshops, Assembly units

Ø Warehousing; Cold Storage, E-Commerce Godowns, Last mile Delivery Points, Transit Points

Ø Land: Leasehold & Freehold, Land Aggregators (Land Bank), Land with potential higher FSI, Infrastructure Developments,

Ø Urban Agriculture Land in areas adjoining to Cities (not for Farming but accumulation for future growth in developing as Real Estate)

The growth of this sector is well complemented by the growth in the economy, corporate environment and the demand for office space as well as urban and semi-urban accommodations. In India, the Construction industry ranks 3rd among the 14 major sectors, in terms of direct, indirect and induced effects in all sectors of the economy.

Indian real estate industry has shown strong growth over the past few years barring Covid induced recession time of 2020. Moreover, rising purchasing power, continuously rising population, increasing investments in socio-economic infrastructures, rapid urbanization and migration of people from rural to urban areas are the main reasons boosting the housing sector, and it’s anticipated to register a strong growth in the coming years.

It is expected that whenever the government intervenes with corrective measures, the concept of co-living will see widespread acceptance in India. This trend is acting as a catalyst for an organized rental market in cities such as Bengaluru, NCR, Mumbai, Ahmedabad and Pune in the same way as co-working spaces did for the commercial space. Also, in 2021, the Indian real estate system will exhibit more financial discipline, accountability, and transparency due to the structural economic policy reforms recently introduced by RBI & Government. This got further boost with new model Rent Control Act which clears many issues hampering growth in rental property market for several decades.

Risk appetite- Types of Investments

Risk appetite is a concept to help guide person's approach to risk. Risk appetite is the amount of risk you can take on your investment. It is the point till which you feel that you should remain invested in an asset class because still in the long run you will be rewarded finally. Till that point there will not be enough change in your mental state.

There are people who are fine with 9% return per annum and there are people who are not even satisfied with 20% returns. Risk and returns are always proportional. Normally people choose a product which matches there return expectation and then compromise with the risk and then later on when there is loss more then there risk appetite, they cry.

Before you start investing, it is best to understand the different types of investments.

For most investors, investments vary in terms of risk levels

Ø low risk,

Ø medium risk and

Ø high risk

Real Estate Investment in India has always been a risky proposition due to Title issues, delays in execution of projects, frequent changes in local laws governing houses, shops or offices with element of corruption but what matters is smart & informed investment with proper due diligence done and obtaining clear & marketable title. One caution is this is not a liquid investment and you may not be able to exit when you desire.

A real estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline. A run-up in housing prices fueled by demand, speculation and the belief that recent history is an infallible forecast of the future. Housing bubbles usually start with an increase in demand (a shift to the right in the demand curve), in the face of limited supply which takes a relatively long period of time to replenish and increase. Speculators enter the market, believing that profits can be made through short-term buying and selling. This further drives demand. At some point, demand decreases (a shift to the left in the demand curve), or stagnates at the same time supply increases, resulting in a sharp drop in prices - and the bubble bursts. Traditionally, housing markets are not as prone to bubbles as other financial markets due to large transaction and carrying costs associated with owning a house. However, a combination of very low interest rates and a loosening of credit underwriting standards can bring borrowers into the market, fueling demand. A rise in interest rates and a tightening of credit standards can lessen demand, causing a housing bubble to burst. Other general economic and demographic trends can also fuel and burst a housing bubble.

Risk factors:

Ø Tenant (Lessee) refuses to vacate the property and litigation is costly & time consuming affair.

Ø Real Estate Business cycle-every decade there is severe bear market lasting 2-3 years

Ø Local Municipality increasing property taxes constantly and in many cities (like Mumbai) property taxes are linked to rental income and exorbitant.

Ø Sometimes you get very nasty tenant who could damage the property, create issues while vacating and constant cribbing during lease period.

Ø Many tenants are involved in illegal activities and you should carry out KYC before taking him as tenant.

Ø Illiquid asset, you cannot generate liquidity by selling it, when you want.

Ø Life of property-Due to wear & tear and erosion, life of property is around 40-60 years and due to noncooperation from other co-owners, redevelopment becomes time consuming and frustrating experience.

Ø Higher renovation costs as currently it takes nearly 20-30% (of current value of property) to renovate the property to make it fit for occupancy & ready for business.

Ø Tenant turnover due to uncertain business environment and failure of many businesses in early stage itself

Ø Retail shops face threat from eCommerce operator as consumers have been shifting out due to price advantages.

Investing in Real Estate:

It is difficult to find fair value of a home in an objective manner. Even if you know how to approximately value in either market, there is no guarantee that fear or speculation will not push prices higher or lower due to major event like Pandemic, War, Natural calamities etc. But, as evidenced by experience in stock market, totally unreasonable valuations cannot be sustained indefinitely.

What is reasonable method of valuation for the real estate market to judge whether the price level is justifiable. You can look st following ratios to ascertain this:

1. House Price to Income Ratio

2. Gross Rental Yield

3. Mortgage as a % of Income

4. Affordability Index

Housing Price-to-Income Ratio as a Way to Measure Maximum Local Affordability

The central assumption for this approach to home valuation is that the housing market should make a medium priced home affordable to a medium income earning family. That is, a middle of the pack income earning family should be able to afford a middle of the pack home. It's certainly arguable whether or not this is true, and there are definitely other factors to include in home valuation (such as wealth), but I think of this method as maybe a first order approximation. That is, I hope it captures the bulk of a home's value, but it probably does not capture all. Or I could be totally wrong.

If we do take this as an assumption and apply what most lenders call affordable (paying a maximum of 28% of your monthly income for your mortgage EMI), we can figure out what medium home price to medium family income ratio is for a given down payment and mortgage interest rate. What we have then is a number that represents the maximum multiple of income that a home could cost and still be affordable (again by the conventional definition of affordability) to a medium income earner. Given the assumption above, this ratio is valid across the entire housing market and allows us to directly compare one market to another (assuming, of course, we are using local values for median family income and median home price).

Banks look at rule like how much value house you should buy based on your yearly income. Some lenders indicate that a home's sale price should not exceed 2.5 times your annual salary. Many houses in China cost 10-40 times annual income in that area and that is bubble. In early 1992, Property price bubble burst and Japan's economy stagnated. The bubble was characterized by rapid acceleration of asset prices and overheated economic activity, as well as an uncontrolled money supply and credit expansion.

Gross Rental Yield: Gross rental yield for your rental property is its annual rental income divided by your property's value (Original Cost including all expenses incurred/paid to buy the asset and put that asset to use (in earning the return). However, if the Property is very old, we should look at yield on current market price of the property. This will bring out market returns and not artificially high returns if we were to take original cost (which may be very low). In India we generally see Rental yields of 2-3% in residential houses & 3-5% in commercial real estate as against borrowing rate of 8-10%.

Mortgage as a % of Income: Or the deposit to income ratio is the minimum required downpayment for a typical mortgage, expressed in months or years of income. It is especially important for first-time buyers without existing home equity; if the downpayment becomes too high then those buyers may find themselves "priced out" of the market. Lenders generally assume EMI at 28-30% of monthly net take home.

The Affordability Index measures the ratio of the actual monthly cost of the mortgage to take-home income. It is used more in the United Kingdom where nearly all mortgages are variable and pegged to bank lending rates. It offers a much more realistic measure of the ability of households to afford housing than the crude price to income ratio. However it is more difficult to calculate, and hence the price to income ratio is still more commonly used by pundits. In recent years, lending practices have relaxed, allowing greater multiples of income to be borrowed. Some speculate that this practice in the longterm cannot be sustained and may ultimately lead to unaffordable mortgage payments, and repossession for many.

Real Estate market cycles

While any buyer of Real Estate cannot predict the future, there are numerous ways to analyze the past and make some informed assumptions as to what the future holds for the real estate market. The realty sector typically moves in four market cycles:

1. Phase 1: Recovery – The market recovers from the downturn and begins to move northwards.

2. Phase 2: Expansion- In this phase, new property is launched to cater to the rising demand. Many speculators wait for this period to reap maximum gains and profit from their investments.

3. Phase 3: Hyper supply – The market is very bullish with skyrocketing prices, mass developments by developers, and everyone is interested to park one’s surplus funds in the sector.

4. Phase 4: Recession – The promises made by developers in the 2nd and 3rd phase are broken due to cash crunch, increase in unemployment, reducing rents and increased vacancy. However, this phase provides an end-buyer an opportunity to get better deals and buy a home at realistic prices.

Economic Theory of Demand & Supply

Ø The Economic Theory of demand says that at higher prices, buyers will demand less of an economic good

Ø The Economic Theory of supply says that at higher prices, sellers will supply more of an economic good

Ø These two laws interact to determine the actual market prices and volume of goods that are traded on a market

In most strong real estate markets, reduced supply leads to increased demand and that is still the case today in some parts of the market. However, today’s market (post Covid 19) is much different than that in the past. There is huge supply vs. low demand and that has compounded the problem. So, one need to understand the market he/she is investing in.

Scope for demand: With migration as the core idea behind job search in bigger cities, the real estate has boomed in the last 2 decades and is likely to grow in the coming years as well. People are ready to invest in small flats with dual purpose i.e., to live and to do investment. So, keeping that in mind, the demand is growing rapidly, and it is expected to rise till 2025. So yes, scope for demand makes it a profitable business with many players. The ratio of defaulters is high, which again makes it a smart move for genuine players to make a better scope in the market and attract customers with timely delivery of projects.

Greater Concentration of Demand: Jobs have a direct correlation in the growth of the Indian economy and changing demographics. Today’s home seekers, be it for buying or renting, don’t mind relocating to new cities if the prospects regarding employment opportunities are engaging. Most jobs tend to be service or office jobs and businesses that provide these jobs need more support services that are most efficiently delivered in big markets. IT & personnel support, office space and healthcare are more effective when they’re concentrated. And nowadays entire cities are also being built using eco-efficient technologies to reduce negative impact on the environment like Jaypee Sports City and many others. So, businesses, cluster in markets where these services already exist, which in turn concentrates the services even more, making the markets even more attractive. What this means for investors is that demand for housing in big markets almost certainly will continue to grow faster than builders can create more supply which will eventually escalate prices and rents.

Lesser risks in smaller markets: If experts are to be believed, the smaller the market is, the lesser the risk is in real estate. Due to smaller geographical area, bigger players don’t jump into the market and this gives a wider scope for the smart local players to play and generate revenue. Also, the ratio of price of purchase and rent is way different as compared to metropolitans, which further increases the scope for people to invest in smaller cities for the purpose of investment and renting.

Huge Growth potential in Tier II & III Cities: A study has identified the cities of Ahmedabad, Bhubaneswar, Chandigarh, Coimbatore, Jaipur, Kochi, Indore, Nagpur, Vadodara and Visakhapatnam as the top 10 emerging cities of India. India is home to some of the top 10 fastest-growing cities in the world, according to a research report recently published following towns has high growth potential: Noida, Ghaziabad, Gurgaon, Goa, Guwahati, Lucknow, Ludhiana, Mysore, Pune, Jalandhar, Hyderabad, Surat, Rajkot, Kochi, Agra, Vijaywada, Tiruppur, Trichy & Thiruvananthapuram are also growing very fast.

The rise in Demand for Emerging Micro-Markets: Micro markets like Bhiwadi in NCR, Halol in Gujarat, Jamshedpur, Jaipur, Jodhpur, Sohna in Gurgaon, Airoli in Navi Mumbai, Pirangut in Pune and Madhapur in Hyderabad witnessed huge demand for residential homes for quality residential homes as industry and economic opportunities grow in these micro-markets.

Policy iniitiatives impacting suddent spurt in Demand: Many a times, there is & would be a suddent spurt in anticipated demand due to some Government announcements like, nearby Metro Station (higher FSI, more demand for Convinient Shopping and office premisis etc.), New Airport coming up in nearby area (which would generate demand for Hotels, Courier Conpanies, Restaurants & short duration stay of few hours etc), setting up of Free Trade Zone etc.

Investment in Commercial Real Estate

Most sophisticated business owners (Enterpreauner) prefer to hire rather than owning the place and hence this segment has huge demand for Investment. Reasons being:

· Businesses want to keep their model variable with very little fixed cost due to uncertainty of business environment and stiff completion.

· They want to preserve capital (very scarce) for their working capital so as to turnaround the capital maximum number of times in a year, to increase their profitability.

· Most MNC`s always prefer to hire the commercial space rather than owning it.

Hassles of Commercial Real Estate:

Ø Maintaining the property

Ø Finding a tenant willing to pay market rent, consistently without delays and cribbing about small repairs.

Ø Sometimes you get very sticky tenant who quarrels on a small issues

Ø Fire safety norms are stringent leaving very little room to maneuver in planning

What should be the period of lease?

· Normally lease period is for 9 years in a block of 3 years each, with 5-10% increase in rent every 3 years. You may also look at linking increase in rent to inflation rate published by RBI.

· If the lease is more than 9 years, stamp duty on lease agreement is substantially higher as Stamp duty authorities in many states in India consider period above 9 years as “ownership”.

· In many case lease period is only 11 months with optional 2 extensions of 11 months each, totaling to 33 months as Owner is wary of tenant not vacating and claiming protection from eviction from Courts. This arrangement (Leave & Licence) is prevalent due to local Rent Laws and longtime taken to get eviction order from courts in India.

Returns Investor should expect (Rental Yield)

Investors receive monthly Rent and they are also benefitting from unrealised gain from property appreciation. Everything depends upon economic theory of demand & supply.

Rental yield in commercial property varies between 5 % -8% annually. In Residential Real estate yields are much lower 2-3%.

Low rental yields: Rental yields in India are low, according to many researches. Many experts points out that if the Indian real estate market was correctly priced, the rental yield should tend to be somewhere close to the cost of borrowing.

Ø In South Mumbai, average yields range from 2.4% to 2.5% gross.

Ø New Delhi rental yields remain very poor, at between 2.9% and 3.2%.

Ø Bangalore has higher yields, ranging from 3.3% to 4.0%, but these are still much lower than yields seen in 2007, which ranged from 7.2% to 10%.

Ø Smaller properties offer higher yields: Yields in the affordable homes segment are higher compared to the mid-level or luxury segment.

Remember that Mortgage Interest rate is a dynamic issue as it keeps fluctuating with Inflation and economic growth. Currently Mortgage Interest rate is 6.75%-8.0% when RBI’s Bank Rate is 4.00%

Capital Appreciation

Real Estate capital gains depend upon a place and economic theory of demand & supply based on potential of generating business. However, generally Gains in commercial Real estate is around 5%-10% annually.

Should you borrow and invest in Real Estate?

Banks offer loan for buying property in the range of 50-70% of property cost. Cash flow would be negative as rental yields are generally less than EMI outflow. It is ideal to treat this as “Investment” without any borrowings due to uncertainty of business environment and holding period of investment should be long term (10-20 years).

What precaution owner should adopt?

Force majeure clause-Before you agree to this clause in agreement, please understand its implications. In the event of any big “act of god” event (like pandemic, earthquake, flash floods) leases can request for waiver of rent during the period of business disruptions.

Insert “mesne profit clause” clause in agreement to suggest that if tenant fails to vacate property on due date or after serving required notice, he has to pay rent 10 times the agreed rent. This acts as disincentive to tenant for not vacating. But remember, for enforcing this clause, you have to approach courts and litigation in India is time consuming and costly matters. Way out is to prefer tenant who is Public Limited Company with substantial net worth as you can directly approach High Court and file a winding up petition which could be very swift (6 months).

In Maharashtra, Corporates (Limited Company) with paid up capital above Rs.2 cr. do not get any protection as “Protected Tenant”

What is “Pagdi” property?

Pagdi is a traditional typical Indian tenancy model. Similar to other renting arrangements, it also involves a tenant and a landlord but the difference is that the tenant is also the co-owner of the property, and has both subletting and selling tenancy rights not the ownership rights of property. In Pagdi, the renter is also the co-owner of the property and pays a nominal (token) rent as compared to market rent. According to the Pagdi rental model, tenant would pay owner a lump sum principle amount also referred to as Pagdi. In lieu of the Pagdi, owner would ensure that the tenant not only enjoys lower monthly rentals, irrespective of the fair market rates with certain terms and conditions. Currently, many micro-markets of Mumbai and Delhi practice the Pagdi rental model. The Pagdi model has become a pressing concern for the government as there are many issues when it comes to the redevelopment of such buildings.

One advantage in old “Pagdi” property is that the building is likely to go for redevelopment and as protected tenant you are likely to receive ownership rights in a redeveloped property with possibility of additional space, with a caveat that there would be no or very little cash flow during the redevelopment period.

Whether India has REITs (Indirect Investment)?

In developed nations, investors invests in the commercial market indirectly through the ownership of various market securities such as Real Estate Investment Trusts (REITs), exchange-traded funds, or by investing in companies that cater to the commercial real estate market, such as banks and realtors. Most pension funds (from developed nations) invest in such model to get benefits of recurring income (cash flow to service recurring pension outgo) and also gain in capital appreciation. In India, REITs have been recently introduced by SEBI for facilitating large commercial real estate properties like Malls, Office complexes, shopping centers etc. Since REITs are listed, it gives you liquidity.

Whether there are any “Big Ideas” in commercial estate?

Shared workspaces (co-working spaces) are workstations rented by remote employees, freelancers, gig workers, consultants, and anyone else who may not have a central office—one space for one individual, no cabins, not big offices. Shared office space is a much larger workplace rented for many people in a similar fashion. Co-working spaces are increasingly finding favour as self-employed, professionals, consultants; startups and even large companies recognise their cost benefits. For owners, Initial investment would be capital cost of property, Interest for borrowed funds, furniture, installation of electrical fittings and gadgets. They would incur recurring expenses on common staff, maintenance, property taxes, electricity., Administration Exp. etc. For hirer they don`t have to incur any capital cost on property and office furniture, fixtures and only invest in IT Infrastructure (Computers and accessories) and very good internet access. They just pay refundable deposit (2-3 month’s rent) and monthly rental on per work station basis. If business succeeds, they increase number of work stations and eventually move to their own rented office after they achieve critical level of business.

Revenue Share Model

While you own large chunk of properties (jointly with other likeminded friends, family members), you engage property management companies to manage the estate on a revenue share mode popularized by McDonald’s franchising model. In this there are 3 parties, McDonald’s as franchisor, Property owner and franchise operator. While McDonald’s get royalty (approximately 15-20%), property owner gets share of revenue in lieu of rent (20-30%) & operator (Franchisee) gets rest (45-55%) of revenue.

What are tax incentives from Real Estate Investment?

Rental Income is taxed as Income from House Property. From Rent Income deduct Municipal Taxes paid by owner and from the balance you get standard deduction of 30% and Interest on borrowed Capital (loan taken to finance the purchase of property but will not include interest on loan against property). You don`t get depreciation as deductions or any expenses on repair or maintenance of property. Instead, you get standard deduction of 30%

On sale of Property, you pay Long Term Capital Gain Tax @ 20% on net gain (sale value minus indexed cost (including cost of improvement) of property)

Why real estate is a good investment in current times (post Covid 19)

ü The real estate investment in the present time needs a different strategic approach than purchasing a property for personal use.

ü Price-points of real estate have largely remained constant since 2016 and if one considers annual inflation rates, present-day prices (which has corrected due to Coronavirus induced Recession) are effectively at discounted levels. Any prudent person makes an investment when the markets are subdued and low. Under the current market conditions, present day apparently is one of the best times to buy a house.

ü Home loan interest rates are at an all-time low. Interest rates in developed economies like Europe & Japan are “Negative” and USA’s Interest rate is just 0.25% (Mortgage Rate in USA is 2.25%-2.75%). This is one of the reasons for many Foreign Funds to buy Prime Commercial Real Estate in India with Rental Yields at 5-8% and Currency fluctuation has reduced due to Dollar becoming weak to huge injection of liquidity in USA by US Fed.

ü The RBI move to ensure linking of home loan interest rates to an external benchmark like the repo rate will also sweeten the home loan. This will result in home loan EMIs being adjusted in sync with RBI lowering the rates, an obvious win-win situation: with the interest rates linked to rates such as repo, banks will have to pass on the entire benefit accrued on reduction on rates. This also gives the RBI an effective leverage to control the cost of funds, which is similar to anti-profiteering in GST.

ü Indian government going all out to help overcome the economic slump; real estate is among the industries that have been earmarked for support. So, things will get better and the price points will rise. So, investing in real estate at present-day prices is a smart investment decision.

ü Amendment in current rental laws: The Indian government has already put up a draft new rental law which will ensure a safe and secure renting experience for investors. This makes perfect investment sense: not only will capital appreciation of the asset would take place, it will also be side by side with a safe rental income scenario. As it is Large Companies with paid up capital above Rs.2.00 cr do not get any protection of anarchic rental law in Maharashtra.

ü Historically, real estate has proved to be an appreciating asset, one which yields fairly good returns on investment. It is in the past couple of years when economic policy reforms have led to stagnant price points, as also the RoI. This is a cyclical situation, and it will change, given the market sentiments.

ü The recent slowdown is part of business cycles which will eventually turn around with the kickstart of economic growth. Therefore, as GDP growth rate gets higher, returns on RE will also fetch better ROI. The inherent demand in real estate is directly linked to the growth of GDP, which makes it the best investment option.

ü In India, people’s attraction towards real estate is actually driven by the socio-psychological rather than economic factors. So, the choice to invest or buy real estate sounds quite rational, in the long run! So, any wise investor will look out for such subdued market cycle to enter and grab the opportunity to invest in real estate.

ü Time, as the adage goes, is the biggest agent of change. So, Tsunamis in the form of demonetization, implementation of RERA and GST as also amendments to the Benami Properties Act and Insolvency laws have changed the way real estate functions; it is now a transparent, safe and secure investment option. Given the positives of such a safe and secure investment option, the prudent investor will find this the right time to invest or buy real estate.

ü Model Tenancy Act: The existing rent control laws are restricting the growth of rental housing and discourage owners from renting out their vacant houses due to fear of repossession. One of the potential measures to unlock the vacant house is to bringing transparency and accountability in the existing system of renting of premises and to balance the interests of both the property owner and tenant in a judicious manner. States can adopt the Act as it is with fresh legislation, since it is a state subject, or they can amend their existing rent acts to factor in the new MTA. The Act aims to formalise the shadow market of rental housing, unlock vacant properties, increase rental yields, ease/remove exploitative practices, reduce procedural barriers in registration, and increase transparency and discipline. States will set up a grievance redressal mechanism comprising of Rent Authority, Rent Court and Rent Tribunal to provide fast-track resolution of disputes. Disposal of a complaint/appeal by the Rent Court and the Rent Tribunal will be mandatory within 60 days. There is no monetary ceiling. At present, in many old properties let out under archaic rent-control Acts, such ceilings have left landlords stuck with outdated rent amounts. Subletting of premises can only be done with the prior consent of the landlord, and no structural change can be done by the tenant without the written consent of the landlord. The security deposit to be paid by the tenant should not exceed two months’ rent for residential property (six months’ rent in case of non-residential property), and should be a minimum of one month’s rent for non-residential property. The Act lists the kinds of repairs each party would be responsible for, with the proviso that money for repairs can be deducted from the security deposit or rent, as applicable, if a party refuses to carry out their share of the work. No arbitrary eviction of a tenant can be done during currency of the tenancy period, except in accordance with provisions of the Act. The Rent Court can allow repossession by the landlord if the tenant misuses the premises, after being served a notice by the landowner. Misuse of the premises, as defined, includes public nuisance, damage, or its use for “immoral or illegal purposes”. If the tenant refuses to vacate, the landlord can claim double the monthly rent for two months, and four times the monthly rent thereafter.

Conclusions: For a long term investors (10-20 years horizon), this is very good investment providing recurring cash flow and capital appreciation. Be careful in selecting a city and place. Many metro cities like Mumbai & Delhi are already very expensive with cost of property skyrocketing. But “B” class cities with population 10-30 lakhs are showing great potential for future. Sometimes you get excellent property in small towns (1-5 lakh population, Taluka level towns) with very exciting potential as such towns offer business for last mile connectivity to rural market.

Once billionaire Andrew Carnegie rightly said, 90% of millionaires got their wealth by investing in real estate. And with time one should have realized that it is true, only if you develop the catalyst mind to make the best of the opportunity. The sector calls for an eye for detailing that understands the highs and lows of the industry and can make the right choices.


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