MANKATO, Minn. (KEYC) – George Massad from True Real Estate joined KEYC News Now This Morning to talk about what buyers and sellers should know

I am interested in making my first real estate investment in India? How should I go about it which makes the process easy?

Making room in one’s portfolio to invest in property is a worthwhile endeavor. Savvy investors in Indian real estate have earned more than 20% annual returns in recent years.

Real estate investments offer a dependable way to grow one’s wealth, particularly when selected in a high-growth area, and purchased at a discount. Today, real estate is even more relevant vis-à-vis the Indian stock market, which many experts believe is overvalued.

India’s economic fundamentals are rock solid. With a GDP growth rate of 7.1 percent, India is arguably the most exciting growth story in the developing world. It is expected to become the world’s third largest economy by 2030. Alongside this growth is an equally enormous influx of people to the nation’s urban areas: By 2050, Indian cities will add 300 million new residents, with millions streaming in every year.

Because all these newcomers will require somewhere to live, growth projections for residential real estate are strong. Demand was nearly 750 million square feet in 2016 and is conservatively predicted to increase by nine percent each year through 2020. This growth potential has not gone unnoticed by institutional investors, who poured US $32 billion in private equity into the sector last year. With India’s reputation as an attractive real estate investment destination on the rise, more growth is sure to follow.

Approached correctly, Indian real estate offers access to a once-in-a-generation opportunity to grow one’s wealth. In order to better understand where to start, we’ve shared our answers several of the common questions we get from prospective investors.

1. Where is the best place in India to purchase property?

Not all Indian property markets are created equal. To get the best returns, one needs to examine the fundamentals of a market. Specifically, one should be on the lookout for cities that possess the characteristics described below.

  • Fast population growth: this ensures that there will be a continual influx of people, all of whom will need somewhere to live
  • High white-collar salaries: elevated incomes make home ownership easier for the average professional, boosting demand
  • Low property prices: affordable prices make it easier for the typical middle-class family to buy a home

Frequently, the tendency is towards the historical juggernauts among India’s cities, such as Mumbai and Delhi, and Kolkata. Historical prominence is no guarantee of real estate growth, though: Both Mumbai and Delhi display several red flags as real estate investment destinations, including slow growth and overpriced properties.

Conversely, India’s new-economy cities – such as Bangalore, Pune, and Hyderabad – rank highly in the above metrics. One city stands out above all: Bangalore. Known as the ‘Silicon Valley of India’, Bangalore has seen over four million people move to it in the past decade, many of them for high-paying white-collar jobs. With housing prices quite reasonable as well, it is no wonder Bangalore is the top destination for real estate investment in India. JLL recently ranked Bangalore at the top of its ‘Most Dynamic Cities’ list, while PwC named it the best real estate investment opportunity in the Asia-Pacific region. In short, anyone looking for a high-potential property investment should consider Bangalore.

2. What is the best type of property in which to invest?

Often, the best returns can be found in projects in which construction has not yet begun. In this early stage, the developer may offer a substantial discount on the market rate, meaning that much of the profit on the property is locked in prior to a single unit being built. However, one must be able to negotiate a discounted rate – or go through an aggregator, such as SmartOwner, which has – to earn the highest returns. With a discounted rate, returns are driven both by appreciation of the real estate market and by the value added to the land during development and construction, and the results can be quite substantial. Again, proper due diligence is essential before investing.

A completed or nearly completed project can also be a worthwhile purchase if bought at a discount. Many buyers gravitate towards these projects, considering them to be safe investments. However, prices in this phase are usually at or near market rates, meaning that most (or all) returns from such a purchase will be driven by appreciation. When acquired at non-discounted rates, this is a purely speculative form of investment, and the unwary investor can find himself at the mercy of the market. If one can attain a substantial discount on a completed asset, though – for example, if one buys through an aggregator that has negotiated such a rate – it can be an exciting opportunity with limited risk.

3. How do taxes work?

The rate of taxation in India is determined by the length of time for which the property was owned. Short-term gains are taxed at around 30 percent, while long-term gains (defined in the most recent Indian budget as property held for over two years) see a tax rate of approximately 20 percent.

Figuring out how to profit from the Indian property market can seem daunting. However, it remains one of the world’s foremost investment opportunities. With the right advice and guidance, investing in Indian real estate is well worth the effort. For more details on purchasing property through SmartOwner, you can reach out to us at enquiries@smartowner.com.