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Why do you buy a property?
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Can realty stocks be an option for property investors? Let us explore the options.
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In the last couple of months, the trend in the stock market has been very interesting. The BSE Sensex isn’t any more adding points in double digit and instead, uptrend has been in 200-300 points. Not surprisingly, the Sensex is taking fewer days to add 1000 points than in the past. Now you may be surprised as to why are we talking about stock market in the property section of this newspaper! What relevance does it have when you are looking for property investment tip
s?
If you are one of those who invests in property as an asset and for good returns, then physical property need not be the only option. As you are aware, owning property beyond a limit can get tough as property needs maintenance unlike most other assets. Hence, those who would wish to take exposure to property can look at alternate options such as realty funds and realty stocks. How can realty stocks make sense when you want to invest in property? Here are some reasons why you can consider the option.
More liquid
While property is the most illiquid asset to invest in, it is not the case with property stocks. Since equity can be easily bought or sold, investing in property stocks can be pretty easy. All it requires is demat and trading account (besides a PAN card). Once you have them, it is a question of choosing the right stock depending on your risk profile. Another added advantage is that you can expect tax-free dividend income from these companies which is not the case when you invest in a physical property. Unless the property is let out, an investor can not expect cash flow from his property. On the other hand, he would be required to prepare for cash outflow in the form of maintenance.
A few years ago, there was not much option for investors to choose from if they wanted to invest only in property sector. Today, thanks to the booming stock market, a number of realty companies have got listed themselves on the bourses and hence choice is good. In fact, in the last few weeks, the FIIs have been aggressively buying into these stocks as India’s domestic consumption story has been very promising when compared with other markets. A strong domestic economy will also reflect in the performance of key sectors such as banking, infrastructure and retail.
Access to other markets
As an individual investor, your ability to invest in other regions or cities will be restricted. However, when you buy into a property company, you will be allowed to enjoy the benefits of uptrend in other cities as the company will be constantly on the look-out for greener pastures. With the property sector getting more institutionalized, a real estate developer does not restrict himself to residential projects alone. Today, property developers are focusing on commercial projects, SEZs and townships. An individual can not afford to take exposure to all segments of property and by investing in a stock, he can hope to do so.
However, here is a word of caution. Investing in property stocks is not a guaranteed formula for earning good returns. Equity as an investment option comes with the baggage of risks and hence you can expect plenty of volatility in your portfolio. The performance of property stock is not solely dependent on the fortunes of the real estate company but could be linked to other intangible factors such as market sentiment, interest scenario, etc. Bu the biggest advantage with it is that you can think of your investment even with a few thousands of rupees.
SRIKALA BHASHYAM
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Property Plus
Bangalore
Chennai
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Thiruvananthapuram
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