A guide to Home Financing for homebuyers

 


Real estate financing offers investors a variety of financial benefits— home appreciation, cash flow, and other tax benefits. Real estate is considered a robust investment option and the field continues to dominate investors’ preferences even today. However, given the present state of the Indian economy, you need to have a strategic approach while dealing with real estate investment, in order to make the most in the residential as well as commercial real estate business sector. Let’s explore some of the best possibilities of real estate financing and loan for real estate investment.


Understanding Real Estate:


Financing for Home or Real estate financing describes several financial methods used by potential investors for securing their independent capital investment. Therefore, it encompasses long-term financial methods used to secure capital while buying and renovating property from outside sources. This process of borrowing and lending money is a liability for both parties — for those who lend the loan, as well as for those who get the loan as a means of financial support.


Investment options for Real Estate:


Buying a property is not an easy task, and is definitely a costly affair. While buying real estate— bank loans, or investing through REITs is the best possible choice, India offers several investment options for real estate.  Following are some of the possibilities:


Primary sources such as Mutual Savings Banks, Commercial Banks, Savings and Loan Associations, Life Insurance Banks. You may also consider investment options through Financial Middlemen such as  Mortgage Bankers, Mortgage Brokers; or through other sources such as Finance Companies, Pension Funds, Credit Unions, Real Estate Investment Trusts, Foreign Funds, Individual Investors, and Farmers Home Administration. There is also the lucrative investment possibility of the Secondary Mortgage Market.


Importance of real estate financing and why you should consider it:


Real estate financing is growing at a minimum of 30% CAGR.  At this rate, the business is doubling and the profit is increasing every 2.5 years.


• RERA and Aadhaar have bound to mainstream the business of real estate in India. This will further bring more organized real estate players into the market, thus allowing higher and safer businesses for home finance companies.


•Greater the development of a country, lesser are the interest rates (most developed economies have a sub 1% or even negative interest rates). The present time is therefore the best time to invest in real estate with loan offers of great profitability.


•The net NPA levels are lesser in home finance companies as compared to the banking sector.


•Due to the need and push for affordable housing — the housing finance domain anticipates the highest growth potential — followed by services, technology, and trading. It also guarantees fixed income, as investors are bound to get three times more of the sum than their 20-years loan from home finance.


•Commercial realty has also emerged as a resilient segment and substantial traction is witnessed towards the Grade A office space. Positive investment growth is also anticipated in the leasing of coworking spaces.


2020-21 anticipates lucrative investment opportunities in India’s real estate


Real estate experts give big thumbs up to investment in the real estate sector for the next two years. 2020-21 anticipates great investment potential for both residential and commercial real estate businesses. The past few years have witnessed an impressive demand for co-ed office space, especially in cities with IT/ITeS players, such as Bengaluru, Kolkata, NCR, and Pune. Real estate builders and real estate developers in Kolkata are expected to have higher demand in the housing and urban infrastructure sector. Furthermore, the strict Government regulations and structural economic policy reforms introduced in the Indian real estate system are bound to bring more financial discipline, accountability, and transparency.


Migration for a job search in bigger cities is likely to increase the demand for real estate in the coming years. People buying small flats has become common — both for residential and investment purposes. The scope for demand in real estate financing is expected to grow rapidly by 2025. Furthermore, the ratio of defaulters is high, it is, therefore, a smart move for genuine real estate players to attract customers through timely delivered projects, as well as to create better scope in the real estate market.


Finally, if you are a beginner investor, remember — financial hurdles are imperative in the process of real estate investment, and all investors require to overcome them at some point in their career. So, if you are planning to add real estate financing to your investment portfolio, start visualizing, planning, and create a better future!


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