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Three ways to maximise your return from real estate investment  |  April 25, 2019

ET Now Digital New Delhi

Real estate, which was one of the most preferred asset class of Indians so far as long term investment is concerned, has delivered a negative return in most of the Indian cities in past few years due to multiple reasons like demonetisation, GST and the government's crackdown on black money. But despite this slowdown in the real estate sector, experts believe investors can still derive handsome returns by investing in affordable housing, cheaper markets and co-living segment, which offer better rental yields.


Here are three ways you can maximise your return from real estate investment


Invest in affordable housing


Flats in the affordable segment offer better rental yields as compared to mid-level or luxury segment. According to Magicbricks data, properties priced below Rs 6,000/sqft have an average rental yield of more than 3%. On the other hand, properties priced at Rs 6,000 per sq ft or more had rental yields between 2.4% and 3%. This trend holds good irrespective of cities. So from a rental income perspective, it is advisable to invest in affordable properties. In some cities, rental yields go up to as high as 4%.


Invest in cheaper real estate markets


In some of the micro-markets across metros and large cities (like Greater Noida, Ghaziabad in NCR) property prices are reasonable and they offer higher rental yields. According to Magicbricks, on a pan-India level, the average yield per sqft stands at 3%, but there are some micro-markets where the rental yield can go up to almost 4.5%.


Worth mentioning here is in localities like Barasat and Garia in Kolkata rental yield was around 4.4% and 4.3% respectively, Magicbricks data suggest.


Besides Kolkata, Bengaluru, Hyderabad, Ghaziabad and Ahmedabad also have higher rental yields.


Invest in co-living space


Off late there is huge latent demand, mainly from millennials in the 18-35 age bracket, for co-living options. Given that millennials make up around 30% of the population, co-living players have an opportunity to service this upcoming demand. These new models have the capacity to push effective rental yield to 8%, the Economic Times said in a report.


Magicbricks data suggests that most of the demand for co-living spaces is currently from the Delhi NCR, the Mumbai Metropolitan Region (MMR) and Bengaluru. These cities account for almost 50% of the co-living segment on its platform. Compared to the overall rental market in the top 10 tier-1 cities, the supply for co-living is just 4% of the overall rental supply. Magicbricks data also shows that 70% to 90% of all co-living supply is fully-furnished, as against just 10%-30% of the overall residential rental supply.


Also, rental income from these properties is directly proportional to the extent of furnishing. At a pan-India level, the average yield on furnished properties is 3.3%. Such apartments are now also being preferred by co-living players.