Business Description
Direct property ownership is one of the best real estate investment options, especially in a country like India where property rates soar every year. Sadly, it’s not for everyone. It requires you to spend excessively on down payments and mortgages.
However, it’s possible to reap the benefits of real estate investments without shelling a lot of money on direct property investments.
Here are seven excellent alternatives to invest in real estate without actually buying any property:
1. Real estate ETFs (Exchange-Traded Funds)
ETFs are listed and traded on exchanges, just like stocks. In India, ETFs include securities traded within India and they comprise of real estate-related industries such as home construction, commercial properties or hotel chains.
By purchasing an ETF, you can invest in properties across India, which gives you wider exposure. Despite higher risks, they are worth considering as they offer high returns. Just like stocks, you can sell ETFs when the returns aren’t as lucrative.
2. REITs (Real Estate Investment Trust)
According to a recent survey, India’s REIT market is expected to grow up to $20 billion by 2020, which makes investing in REITs a great idea.
REITs invest in real estate projects, mostly commercial properties. Just like ETFs, REITs are traded on stock exchanges and an investor can easily purchase or sell REITs from the listings on the securities market.
With initial investments starting from INR 2,00,000, you can invest in REITs and earn returns between 8-14%. The risks are quite minimal as REITs are comparatively less volatile than the stock market, mutual funds and gold.
3. Crowdfunding
Crowdfunding involves raising funds using online crowdfunding platforms by appealing to friends, families, individual donors and investors. The crowdfunding platform will charge an annual fee between 0.5-3%.
In India, there are three types of crowdfunding -- donation-based model, lending model and equity-based model. For real estate, the most commonly used crowdfunding method is the equity-based model. As an investor, you’ll either fund a real estate project or raise capital for a project along with other investors and real estate companies.
Since you can choose the property you wish to invest in, the risks are quite low and the projected returns are high, as high as 20%, especially if the property is in a high-growth residential area in a developing city.
4. STRs (Short Term Rentals)
STRs are fully furnished apartments or homes rented out temporarily, ranging from a few days to a few weeks, to travellers who wish to explore a locale, its culture, or do business in the area.
Unlike hotels, which require a significant capital investment along with added services like housekeeping which only increase the expenses, STRs require less investment as they’re built around the concept of providing flexible stay options making it an excellent option for homeowners to earn income from their spare rooms or homes.
5. Flipping houses
Flipping houses involves buying a property, renovating it (if required) and reselling it for a profit. To get high profits, investors buy properties that offer a lower-than-market price or belong to owners in dire need of cash. After taking possession of the property, the investors immediately start looking for prospective buyers by advertising the property listing.
Flipping houses requires extensive knowledge of real estate property types, values and the market. An experienced investor flips multiple properties without wasting any time and is always on the lookout for suitable properties to buy.
6. Real estate syndication
Similar to crowdfunding, real estate syndication involves reaching out to investors to raise capital for large real estate deals such as *****iniums, hotels and commercial spaces. In exchange for funds offered, the investors are given partial ownership.
The syndicator is responsible for collecting funds, finding and acquiring the property and managing the whole process. To get involved with real estate syndication, the syndicator must have an accredited investor status. As a result, this is an option only for experienced investors and HNIs (High Net worth Individuals).
7. AIFs (Alternative Investment Funds)
AIFs invest in startups, early-stage venture funds, infrastructure funds, real estate, equity, and more. According to the Securities and Exchange Board of India (SEBI), AIFs are privately pooled funds that can be either open-ended or close-ended, depending on the category.
While AIFs are more lucrative than mutual funds, they require a substantial minimum investment of INR 1,00,00,000 and as a result, are ideal for HNIs.
Final words
Diversifying into real estate can guarantee high returns with low risks. However, be prepared to do your homework and run some experiments to find the best options for you. Don’t expect to get rich overnight and carefully consider your financial goals, budget and expectations before making any decisions.
SILA are one of the real estate developers in Mumbai that have their scope in the Alibaug real estate development and real estate asset management.
