How to Invest in the Real Estate Sector: Beginners Guide

Overview 

Real estate sector has been the traditional investing method of our ancestors for a very long time. We have always heard our parents recommending us to buy the property and rent it out to have stable returns for a lifetime. 

The problem is not in investing in real estate, but in having hefty capital to buy a house or flat and then rent it out. It’s not easy to have an account with surplus money to buy lands and flats at an early stage of life. And waiting to get enough money in due course of life is certainly not the right option. Savings and investments should start as soon as you start earning. 

So what’s the option to invest in real estate if you don’t have enough money to buy properties? The answer is the stock market. Indian stock is full of different sectors and their stocks, and one of the most trusted sectors with remarkable ROI is real estate. There are several stocks of real estate that grow as the sector grows. 

Real Estate Growth in India 

With the significant positive graph of urbanization and India being considered one of the fastest developing nations, the real estate sector has enjoyed tremendous growth. With world-class infrastructure projects getting approved by the government and people’s increased interest in putting money into the economy, all these things collectively contributed to uplifting the real estate sector. 

From the analyst’s point of view based on the union budget, the real estate sector is for several tax redemptions too, which is significantly going to increase the demand in the sector. The reason behind this prediction is the unwavering infrastructure development in India, which plays a huge role in the growth of the real estate sector. 

It has been claimed that Indian housing sales have remained unbeaten in FY 2023-24, with significant growth of more than 7%. This contributed to the inflated price of construction and realty stocks. 

Market Size of Real Estate Sector in India 

Based on the research of IBEF (Indian Brand Equity Foundation), by the year 2040, the growth of the Indian real estate sector is going to see double growth. The approximate ballpark is Rs 65000 crores (USD 9.30 billion). 

If we look into the history of real estate, it was only 12000 crores in the year 2019. The growth that is being seen is remarkable and worth investing in. By the year, the sector should be able to contribute at least 13% of the Indian GDP. This is a good sign to invest in this sector via any possible means, be it stocks or physical properties. 

The previous year, fresh realty projects across India’s top metro cities grabbed a hefty share of 41% of the whole sector in the first quarter of the year only. 

Real Estate in the Stock Market 

Real estate in the stock market is one of the fastest growing sectors, it is one of the best sectors having excellent fundamentals as well as technicals. Both traders and investors are always looking forward to studying these stocks and putting money in their stocks. 

Investing in physical properties is not always the right option, since it makes a big hole in your pocket for once. Also, the lack of a hefty amount for buying capital shouldn’t stop you from moving into the real estate sector. You can start investing in stocks of the companies that you think are responsible for the growth of real estate sectors and companies related to that. 

Real Estate Stocks 

Real estate in the stock market is quite a big sector and its related sectors constitute stocks having good potential, here are some of the traded real estate stocks:

1. DLF: One of the most popular real estate companies that are responsible for vast construction projects. Its market cap is Rs 2,19,027 cr. 
2. IBREALESTATE: It is again one of the leading construction companies in India that has its major focus on construction and development of residential, commercial and SEZ projects across major Indian metro cities. It has a decent market cap of Rs 9,901 cr. 
3. Godrej Properties: Godrej Properties is a well-known Indian construction company, with commercial projects running almost across the whole nation. It has a market cap of Rs 73,850 cr. 

Apart from these top three companies, there are various other stocks like:

1. Oberoi Realty
2. NBCC
3. Prestige Estate
4. SOBHA

… many more. 

Further, if we connect the related sector of real estate with their sectors; i.e. the infrastructure sector also goes well if the real estate goes well. The Infra sector includes raw material stocks that have the potential to give you good returns over time compared to the physical properties with investment according to your capital appetite. 

Here are some more related stocks that can rise alongside real esta: 

1. DalBharat 
2. Ambuja Cements
3. ACC
4. JK Cements

Real estate investment trusts or REITs are the kind of companies that are responsible for investing in large-scale income-producing realty projects and related estate. These projects may include offices, buildings, resorts, warehouses, etc. Unlike other realty companies, REITs do not run these projects to resell them at higher prices, but REITs buy and develop properties to operate them as part of their business. It acts as an investment in their portfolio. 

What are REITs? 

Real estate investment trusts or REITs are the kind of companies that are responsible for investing in large-scale income-producing real estate projects and related estate. These projects may include offices, buildings, resorts, warehouses, etc. Unlike other realty companies, REITs do not run these projects to resell them at higher prices, but REITs buy and develop properties to operate them as part of their business. It acts as an investment in their portfolio. 

This way, REITs provide an excellent way of investment for an individual who wants to earn a share of the income produced through the REIT investment portfolio, without actually buying the properties themselves. 

How to Invest in REITs

Publicly traded REITs can be easily traded on stock exchanges, by purchasing them with the help of a reliable broker. Further trade REITs can be bought through a broker. You can also invest in shares of REIT, REIT mutual fund, or REIT exchange-traded fund.   

How to Analyze REITs?

There are several REITs that are listed on stock exchanges in India that provide a good and stable return to investors. To analyze which REIT to invest in, you can check the technicals of its listed stock via demand and supply combined with price action. Further, to analyze its fundamentals, you can check out the recent projects the company is working on. For example, if you see potential in EMBASSY (REIT listed on NSE and BSE) and its chart looks convincing to you, then you can check the projects of the company. Companies make their ongoing and completed projects public via various portals or on their official websites. You can see their investments, projects, and tenant details easily. If all of this looks convincing to you, then you get a green signal for your investment. It helps in knowing whether your money will be put into good projects or not. After all, the money earned from these projects is given in the form of returns and dividends to the investors. 

At Last

Finally, investing in real estate through the stock market is an important approach for those wishing to capitalize on the rising sector without incurring big capital needs. As India’s real estate industry grows, owing to urbanization and significant infrastructural development, realty stocks and REITs provide investors with accessible and profitable options. By pursuing these investment opportunities, you can participate in the sector’s growth while earning considerable profits. The stock market helps you to diversify your investments, reduce risk, and begin accumulating wealth early in your career. Taking this technique coincides with conventional investment wisdom while also utilizing current financial instruments to maximize your real estate investment possibilities.

Frequently Asked Questions