Quantitative finance collector
C++ Matlab VBA/Excel Java Mathematica R/Splus Net Code Site Other
Jul 1

Save Money by Limiting the Need for Repairs and Renovation

Posted by at 21:46 | Default | Comments(0) | Reads(1034)

If you have made up your mind that your next big-ticket investment is going to be in real estate, particularly in on going residential projects in Mumbai, then there are several sensible ways of saving valuable money without compromising on the quality of the deal. After all, the entire purpose of investing in real estate is to get a decent return on your money while diversifying your portfolio for stability.

Save Money by Purchasing Right

The first decision that will end up saving a lot of money from being wasted is whether the purchase should be a residential property or a commercial one. While there’s no denying the special attraction all Indians have towards residential property, you need to investigate whether it is the right time to invest in the luxury apartment Prabhadevi that you had been eyeing for some time. At this current point of time apartments in the really upscale development projects in Prabhadevi that have been completed or are under construction have reached their peak prices whereas retail spaces as well as office units have just begun to recover from the price collapse of a few years back. The cost-effectiveness of the purchase will be clear from the rental yields that you will be able to obtain. Currently a 2/3 BHK Prabhadevi apartment is unlikely to yield more than 3-5% per year, while commercial units can give you a return in excess of 10%.

Open in new window

Save Money by Limiting the Need for Repairs and Renovation

If you are buying an old property, you need to find out if the condition of the property is such that you need to conduct extensive repair and renovation as that is likely to add to your total investment and lower your yield. Commercial properties are a little better off than residential properties in this regard as the tenants would generally like to do up the offices or retail spaces in their own way – all they want is the basic physical infrastructure. Tenants for residential properties on the other hand can be really finicky if they are paying premium rentals. Get the whole picture of the residential realty scenario in the 2015 guide on upcoming residential projects..

Save On Taxes

Savvy real estate investors make it a point to hold on to the property for a period of at least three years before selling it off. This is because profits generated on the sale of properties held for less than that is taxed fully in the year of the sale while they will attract long term capital gains tax at only 20% if the sale is after three years of ownership. Further, the capital gains tax is calculated only after application of indexation that factors in the effect of inflation. This considerably brings down the payable tax amount when you compare it with the rate of short term capital gains.

You can also save on the tax if you buy upcoming residential Prabhadevi property from the proceeds of a house property sale, however for this to be effective the purchase must be within two years from the sale date. The exemption is also available for those constructing new houses within three years. You need to keep in mind that this is an incentive provided by the government for people to buy residential units so you cannot avail of these tax breaks by investing in commercial property from the proceeds of a sale. The tax break is available only on one additional house besides the one you inhabit.

Financial Instruments for Saving Money

You can also invest the profit made from property sales in capital gains bonds issued by government authorities like NHAI and REC. These instruments have lock in periods of three years and a maximum investment limit of Rs.50 lakhs.

Add a comment
Enable HTML
Enable UBB
Enable Emots
Nickname   Password   Optional
Site URI   Email   [Register]