Real estate investment securities and equity funds are being sold at a record pace across the country, raising questions about whether these investments are a good idea or not.
While there are still no clear answers to the question of whether investing in real estate is the right way to invest, real estate investors are starting to see the returns on their investments.
According to the latest research by Investec, a research company, the number of investments in real-estate investments has increased by 50% in the last three years.
Investec said that in the year ending March 31, 2016, the average value of investment assets held by investors in the stock market had risen from Rs. 7.75 lakh crore in 2016-17 to Rs. 8.75 crore crore in 2017-18.
Investee-managed real estate investments are also seeing a boom, said Kavita Krishnan, managing partner at Kavitak Securities.
The number of investors holding shares in these investments rose from 651,904 as on March 31 this year to 757,906 in the current financial year.
Investment equity funds and real estate funds are seeing a similar growth rate.
Investments in equity funds grew from 631,926 to 762,912, while investments in equity-backed real estate were growing from 806,927 to 1,008,918.
In real estate investment funds, investments have grown from Rs 2.76 lakh crore to Rs 2,98,000 crore in the financial year ending in March.
Investing in real property has also grown by 50%, while investments have also grown from 7% to 11% over the same period.
Investees are also getting a break on their fees from real estate, said Krishnan.
Real estate investments pay the investment company a fee of Rs 50 per share and investment returns are typically 20% to 25% in a year.
The real estate sector is one of the sectors where the government’s move to ban all foreign investment is hurting investors.
Invested funds are now investing in companies that are doing poorly in India.
Many of these companies are underperforming in terms of return and, in the case of some, are now going out of business.
In the past year, investments in investment companies that invest in foreign companies have declined from Rs 5.5 lakh crore last year to Rs 3.2 lakh crore as of March 31.
Krishnan said that real estate and investment funds are likely to have a negative impact on the economy as a whole.
The fact that we are not seeing investment in real Estate sector is a problem for the economy, she said.
Real Estate investing is a poor investment as it is not sustainable in the long run, said M V Rangasamy, chairman and managing director of the Kavitan Group.
Rangasary, a real estate developer, said that there is a lack of awareness in the society about investments in property.
A lack of infrastructure is also hindering real estate investing.
The problem is exacerbated by the fact that investors in realty are not making a return.