Want to get Maximum returns from your property Investments ?
http://ghardwar.com/2014/04/05/want-to-get-maximum-returns-from-your-property-investments/
If you have Rs 25 lakh and want to make hassle-free returns from investing this amount in real estate, then Real Estate funds make a viable proposition. The post-tax returns come to the tune of 10-20 per cent and there is a lock-in period of 6 years – after this period you can take exit at will.
Investing in property requires sizeable capital. Several times, people who do not have experience and expertise in the real estate market prefer to stay away from it. They are aware that investing in real estate could be rewarding, especially at a time when other financial instruments such as equities, mutual funds and commodities have been generating average returns which are lesser than a good investment in real estate. So what is the solution? Should they just jump the gun, invest and run into uncalculated risks? Is there any other way? Here are some ways through which one can invest in real estate and generate hassle-free returns.
Often mistaken as Real Estate Mutual Funds (REMFs), these funds have no relation to the equity markets. REMFs invest in the shares of real estate companies listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Given this nature of investment, REMFs are intrinsically associated with stock market volatility. Real estate funds, at the other end, invest in real estate projects.
How to invest in Real Estate funds?
At present, there are six Real Estate funds operational in India: HDFC, ICICI, Birla, Piramal IndiaREIT, Milestone and Dewan Housing. Now the question is how to invest in these funds and what is the minimum level of investment? Currently, only Piramal IndiaREIT Fund V is open for subscription. The fund aims to achieve the target of Rs 1,000 crore and has collected Rs 750 crore so far. “I think, the rest of the amount will be collected in the next two weeks,” said Dhiraj Mittal, chief executive officer, Prime Capital Services. The minimum ticket size for investing in this fund is Rs 25 lakh, and then one can buy units in the multiples of Rs 1 lakh per unit.
An investor does not need to pay the entire amount upfront. At first, he has to pay 10 per cent of the total amount, and then the rest of the amount in a period as specified by the Fund house. The payment is spread over several months.
What is the expected Return on Investment (ROI)?
“These funds generate post-tax annual returns in the range of 10-20 per cent. The returns may vary depending on the economic and business environment,” Mittal added. Also, there is a lock-in period of 6 years as well. Large and mid-cap funds, at the other end, generated returns to the tune of 6.31 per cent in 2012-13.
As per the company reports, the Piramal IndiaREIT Fund I which was launched in 2006, posted an internal rate of return (IRR) at 30.2%. Fund II posted IRR at 20.9 per cent. IRR for Fund III and fund IV have not been declared yet.
As per the guidelines of the Securities and Exchange Board of India (SEBI), all Indian resident individuals, Hindu Undivided Families (HUFs), corporate houses, financial institutions and trusts are allowed to invest in the Real Estate funds. “NRIs cannot invest in such funds,” said Rajat Dhar, managing partner, Cogent Advisory.
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