Section I: Income Tax and Your Investments

• Ques: Real estate is best of all investments - for all investors, at any age
• Ans: Key points:
  • There is basic need of your home which is further sweetened by tax benefits and lower rate of interest.
  • Do not wait for any preconceived notions; buy House which you can afford and be a proud owner.
  • Buy it with loan, its financial prudence. Neither put all your money in less liquid asset, nor wait for funds to accumulate.
  • The tangible love for generations is your house. Now residential house property has one more benefit i.e. you can get reverse mortgage against your self occupied house and plan your retirement with it. Best thing happened in recent past for senior citizens.
  • Buy for medium to long term only as the changing of house is costlier in terms of stamp duty, brokerage, tax liability before 3 years, advertisement for buyer search for right price etc.
  • Apart from your one house second real estate should be commercial property or agricultural land out of city i.e. 25 km away from municipal limits to be tax efficient.
  • Instead of buying 2nd house change into bigger house after 5-10 years as per your financial position.
  • Prepare will and transfer your property as per your wish otherwise it will be distributed after your death in equal ratio to all legal heirs.
  • Do not put all your money in real estate; keep some liquidity and diversify into PPF/Fixed deposit/Gold etc.
  • The future investment in real estate should be in Real Estate Investment Trust (REIT) .REIT is just like mutual funds as its allow smaller investment , gives you liquidity, professional management and govt. control. Most importantly it helps in diversification within real estate investment.
  • The overall allocation in real estate investment depends on ones risk profile, liquidity, taxable income, and the time horizon for investment, however as a thumb rule you can invest up to 20% of your portfolio in real estate other than your house.