Opportunities for Small Investors in Real Estate Sector

In India, small real estate investors currently do not have as much scope as institutional investors. They can hold multiple properties, but banks will generally not fund beyond a second home loan. That does not mean they cannot invest beyond that from their personal accruals. They certainly have the option of investing in rent-generating assets, which can fetch very decent returns if they have been purchased wisely.

Despite the present limitations for small investors, a property investment can give the buyer protection against inflation. Like gold, real estate tends to retain its intrinsic value. However, unlike with gold, it is possible to earn a regular income on it. Depending upon various economic factors, a property owner can increase rent in times of high inflation. Also, real estate is always a good investment option because of the possibility of capital appreciation. Of course, an individual must decide on the basis of his own income, existing financial health and risk appetite how much he should allocate for real estate.

The limitations pertaining to buying and selling of real estate in India exist to prevent speculation. Considering what has happened before such regulations were enforced more strictly, they are required. We do not want a situation similar to that faced by the US in this country - thankfully, our banking system is a lot more conservative , and this has been one of the main reasons why India did not suffer as much as other countries did in the recent economic turmoil. Unfortunately, there is currently no way of predicting when they will become a reality. Small investors will only get real investment power when REITs (Real Estate Investment Trusts) and REMFs (Real Estate Mutual Funds) see the light of day in India.

These vehicles will present a liquid, dividendpaying means of participating in the real estate market. We are all still awaiting clarity on the introduction of REITS and REMFs in India.