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Real Estate as an Investment Option

According to a recent study, returns from rental incomes on investment in commercial property, in metros, is around 10.5%, the highest in the world. Real estate in India is now considered as one of the hottest investment options as compared to bank deposits or bonds where your return ranges between 5.55 to 6%. With the development Real Estate Mutual Fund, many issues of small scale investors have been answered.

Need for Real Estate Index and its Benefits

India is in need of a real estate price index, given the shortcomings of the existing zonal valuation system of the government and the impact this has on government revenue, financial stability, land allocation and use, policies, and legislation. The present property values are found to be grossly undervalued/overvalued because of the lesser understanding of valuation practices and market trends in the property industry.

At present, consumer price index is used as a substitute index to deflate value added of current price for real estate industry. For filling this gap, providing price statistics information for national accounting and satisfying the needs of national macro-economy management and control, government is thinking of constructing a housing price index.

Real property prices in India (just like many other countries) are very diverse owing to factors such as location, type, and features of the property. Lack of trained appraisers and outdated legislations and practices compounds problems of property valuation in India.

The price index should provide a consistent measure of price developments over time. It should be able to serve the needs of different users -

• Government

• Banks

• Real estate developers/sellers

• Individual customers

• Investors in Real Estate

• Foreign Investors/ developers etc.

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* Contributed by: -
Rahul Abrol & Rahul Gulati,
MBA - IInd Year,
Institute of Management Technology, Ghaziabad.