Bollywood movies and TV shows often paint real-estate investors as tycoons with unlimited cash – often earned through questionable means. Or they would picture them as ruthless landlords chasing helpless tenants for rent. Add to that the advice from your uncles: “You need to be ultra-rich to invest in real estate”. And the concerns of your aunties saying “Dealing with tenants is a nightmare, not everyone can do it”.
You’ve probably heard all these and created perceptions and stories in your mind. But, think honestly, have you ever sat for a real, meaningful conversation about what it takes to invest in real estate?
Let’s cut through the noises of myths and have an honest conversation about investing in real estate.
Table of content
- Real Estate Requires a Lot of Money
- Real Estate Always Guarantees High Returns
- You Need to be a Landlord to Make Money
- Location Is the Only Factor That Matters
- You Need Extensive Knowledge to Succeed
- Real Estate Investment Is Only for the Long Term
- Debt Is Always Bad in Real Estate Investing
- Debt Is Always Bad in Real Estate Investing
Myth 1: Real Estate Requires a Lot of Money to Get Started
Most people believe you need crores in your bank account to even think about investing in real estate. And that’s one of the biggest reasons most people don’t even try to get into real estate investment.
But here’s the reality—getting started in real estate doesn’t have to drain your wallet or burn your bank.
Platforms like Real Estate Investment Trusts (REITs) make it possible to invest with as little as ₹10,000 to ₹15,000. In India, REITs like Embassy Office Parks and Mindspace Business Parks have delivered annual returns of 10%-15% since their listing.
There are crowdfunding platforms that allow you to co-own a commercial property for as little as ₹50,000. This means you can earn rental income that matches your investment share and benefit from the property’s appreciation over time.
Real estate is no longer just for the ultra-rich; it’s for anyone willing to explore new ways of investing.
Myth 2: Real Estate Always Guarantees High Returns
Real estate investment is seen as something that always brings high returns. “Property prices always go up” is a statement we all have heard. And so, whoever tries to get into real estate investment, comes with a dream of raining money.
In reality, returns in real estate, like any other investment, are influenced by market conditions and have it’s own risks.
Between 2012 and 2019, property prices in major Indian cities like Mumbai and Delhi either stagnated or grew at a modest rate of 2%-3% per year, barely outpacing inflation. On the other hand, cities like Hyderabad, Bangalore, and some parts of Gujarat experienced double-digit growth during the same period. This highlights the importance of location and timing.
An investor who bought property in Gachibowli, Hyderabad, in 2015 may have seen its value increase by 50%-70% within five years. In contrast, someone investing in an oversaturated area like Masjid Bunder in Mumbai might have faced losses or negligible growth.
The key takeaway? Real estate can deliver high returns, but only if you make smart, well-researched decisions.
Myth 3: You Need to be a Landlord to Make Money Through Real Estate
When most people think about real estate investment, they imagine being a landlord chasing tenants for rent. But real estate is not simply owning a house or shop and letting them out on rent. There are several ways in which one can earn through real estate.
Real estate can be an active as well as a passive means of investment and earning.
Fact: Reports from platforms like Airbnb revealed that an average person in India earned about ₹2.4 lahks annually in 2023 hosting guests at their home. As discussed earlier investments done through Real Estate Investment Trusts (REITs) can earn 6% to 8% annually.
A tech professional in Bengaluru could rent out a spare room on Airbnb, easily earning enough to cover their monthly mortgage payments—all while continuing their 9-to-5 job.
It is very clear that real estate investment gives the flexibility to earn actively or entirely passively. There’s no compulsion to be a landlord chasing tenants.
Myth 4: Location Is the Only Factor That Matters
Most people believe that the only thing that matters in real estate is the location. If you get the right location, you will get unbelievably high returns on your investment. While the location is undeniably important, it’s far from the ‘only’ thing that determines a property’s success.
Location sets the foundation, but factors like infrastructure, connectivity, and future development scope can significantly impact a property’s value.
For example, the announcement of infrastructure projects can skyrocket property prices. The announcement of the Panvel Airport led to a 20%-30% increase in property values in the surrounding areas—even before the airport was completed.
A property near a proposed metro station can see a dramatic surge in value once the metro becomes operational. On the other hand, even a premium property in a high-end area might struggle to grow in value if it suffers from poor connectivity or lacks basic infrastructure.
The takeaway? Look beyond the location and dig deeper into the potential of the surrounding developments and facilities.
Myth 5: You Need Extensive Knowledge to Succeed
Some people shy away from investing in real estate simply because they think it is complex and one needs to be an expert to deal with the complexity. While being an expert will never hurt but you do not need to be one to start investing in real estate.
With the right guidance and tools, anyone can make informed decisions. In fact, over 70% of first-time buyers rely on real estate agents or consultants to help them navigate the market. Platforms like Magicbricks and 99acres also provide detailed insights into property trends, rental yields, and future growth potential to simplify decision-making.
A first-time investor might use property listing websites to compare properties based on rental income and long-term growth. Even without deep industry knowledge, these tools can help narrow down choices effectively.
Myth 6: Real Estate Investment Is Only for the Long Term
The ‘gyaan’ passed down through generations often tell us that real estate investment is a long-term game where sons and grandsons can enjoy the benefits of investments done by their fathers and grandfathers.
Practically, strategic investments in real estate can bring us impressive returns in both long-term and short term.
Practices like house flipping—buying, renovating, and selling properties within a short time frame are gaining popularity in India. The profits earned here can range from 20%-30% of the purchase price, depending on the scope of renovations and market conditions.
Today, one may buy an old flat, for let’s say ₹50 lahks, spend ₹10 lahks on renovations, and then can easily sell it for ₹75 lahks, earning a profit of ₹15 lakhs. And this can be done in just six months!
Now, you don’t need to wait for ages to reap the benefits of your real estate investment if you know the right strategy.
Myth 7: Debt Is Always Bad in Real Estate Investing
One of the very common beliefs about money in India is that taking a loan is bad. People often let investment opportunities in real estate go because they consider debt to be bad.
Practically speaking, debts, when used wisely, can amplify your returns and make real estate investments more accessible to you.
Leveraging a mortgage can enable higher returns than the interest cost. In India, home loan rates typically range between 7%-8%, while rental yields in prime locations are 3%-5%, and annual property appreciation can add another 6%-8%.
Suppose you purchase a property with 20% equity and 80% debt. If the property appreciates by just 10% in a year, your return on equity could exceed 30%-40%, thanks to the power of leverage.
Over to You
Be it gaining financial independence or achieving early retirement, you can’t get it unless you take action. Start planning, calculating, and implementing the strategies that align with your goals. If you’re unsure where to begin or need personalized guidance to create your passive income roadmap, feel free to connect. Let’s turn your retirement vision into a reality.
Whether you’re curious about rental yields, house flipping, or passive strategies, now’s the time to start asking the right questions to the right people.
Let’s hear your thoughts in the comments or send a message to discuss your next move. The floor is yours, the decision is yours!
