The stock markets have been consolidating ever since they touched an alltime high a few quarters ago. The negative sentiments in the stock markets here are being fuelled by developments in the global markets as well as growing concerns over India’s macroeconomic conditions and delays in certain key policy decisions. Since the conditions in the global markets are uncertain, investment in the equity markets come with higher risk, especially for investors with a low risk profile.
Therefore investors with a low risk profile should plan a strategy for a gradual reduction in their equity exposure and rebalance the portfolio by investing in debt-based instruments and significantly in property.
Investments in property are good for longterm investors as their per capita incomes have been rising consistently over the last few years, especially in the urban areas. This rise in the per capita income has resulted in increased demand for property and as a result there has been a rise in prices in the property market.
Investment-led buying in the property market leads to more demand and also contributes to the price rise in the markets. In the last few quarters, there was some consolidation in the property investment market owing to the high home loan interest rates. However, as the interest rates have started coming down, there are expectations that property prices will move in an upward trend.
These are some significant aspects of a property investment:
In general, investments in property should be made for a long term. Investments in property require a higher upfront payment and the ticket size is generally larger. Therefore, it is important to analyse certain aspects while entering into a property investment – location of the property, clarity of title and entry price. These factors govern the returns from a property investment.
INCOME FROM PROPERTY
Investments in property with good rental income ensure a short-term inflow for the investor. The rental returns from a property come in handy as they can be used to augment the monthly income. Rental income, especially from a high value property bought with a home loan, is significant as it can be factored against the interest payments. And it will bring some income tax relief for the investor as well.
The appreciation in the value of a property is called capital gains. Expectations of high capital gains are the main reason for most investments in property. Property investments in the upcoming areas of growing cities give the best returns over time.
Therefore, investors looking at investing in a property should prepare a careful due diligence with respect to various aspects related to it. The property has to be owned for more than three years in order to categorise the capital gains as long-term capital gains for the tax benefit.
SOME POINTS TO KEEP IN MIND:
Long timeframe: Investors should look at a longterm horizon (more than five years) while investing in property. The tax benefits on capital gains accrue then.
There are many options available in the property market. However, it is important to evaluate the investment with respect to the location of the property, clear title and entry price. The second sale property market also offers some good deals. There are many properties on offer in the second sale market by investors. Finance: Financing a property is another significant factor. Since a property investment is a large financial commitment, it is important to plan for sufficient liquidity (especially those funding it with a loan) to service the debt as well as other major commitments.
Source _ TOI