As economic conditions improve globally, the cheer is coming back into property market. It is good time for those who want to invest in property, both residential for own use as well as from an investment perspective. Investments in property bring diversification to an investors’ investment portfolio. Historically, it has been proved that a property investment is low-risk option with high returns over a long-time. Usually, price volatility is quite low in property market. Due to global recession, property prices corrected in the recent past, thereby improving market conditions with increased demand.
Investments in property market offers short term returns in terms of rental income and long term returns in terms of capital gains. Hence it is suitable for short-term as well as long term perspectives. The Indian government also provides the income tax exemptions for those invested in the residential property. In general, investment in property require a significant upfront investment, hence becomes important to plan well while entering into property investment. Location and price are the two most important that very much decide the returns from the property investment. Here are some options available for the investors:
Residential property
Investors who do not have their house of their own should first look at buying a residential property. The Indian 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 in 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 investment is also good for those who looking at high rental income and capital appreciation over 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.
Hence 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.