The overall industry has reached the staggering size of US $70 billion and will cross the levels of US $ 120 billion by 2011.

Moreover, reforms in banking and financial system of the country have turned dreams of buying property into reality. With this, the popularity of real estate as an instrument of investment has also soared staggeringly in the past few years in India. And of course, everyone wants to own property, to ensure security—emotional and financial.

Nevertheless, investment property can also be considered by people who own a house and opt to buy a second home as investment option. These second homes are generally given out on rent.

The concept of owning second homes to be used as rental real estate seems to be gaining popularity as investors find real estate boom more dependable than the fluctuations in the stock market, another investment option considered for its return generating potential in a short period of time.

However, as far as property investment in India is concerned, you need to do a plenty of research and use your reliable contacts and connections that can help you to find a suitable property for you. Once that is done, you need to prepare yourself for a fair amount of financial commitment and a significant role in maintaining the property.

Current Senario

Today, real estate in India has witnessed a mark improvement in terms of transparency, so much so that its international ranking has reached high. Moreover, Indian property has become the digs that can yield pot of gold. Here, the real estate scenario has changed much for the past few years. Earlier, it was considered too difficult for a common man to purchase a house. But, in the last decade, the key driver has come within the reach of an average middleclass income householder. No one wants to let the opportunity of buying an investment property be slipped out of their hands.

Commercial Property in India

Rapid expansion of information technology industry in India is considered to be a key driver fuelling the demand for commercial land in India which is selling at whopping amount as the Indian cities are undergoing a paradigm shift. As such, there is no specific data revealing facts and figures regarding national statistics, yet property surveys show thousands of commercial and retail projects budding up across the country that make them excellent prospects as investment property.

Rising demand for commercial land is prompting overseas investors with deep pockets to invest into India. The foreign investments are likely to find large space in development of special economic zones and shopping arcades. With such a massive inflow of foreign investments, Indian real estate is on its verge to reach saturation level as China’s real estate market.

The investment property or hot destinations now are the technology driven growth centers of fast flourishing cities like Bangalore, Mumbai, Hyderabad, Madras, Noida, and Gurgaon. As a matter of fact, the real estate boom has spared no major cities to remain unaffected by its charisma. Talk about any of the four directions, you will find it there. A prospective commercial property in metros is offering a rental yield of 11-12 per cent per annum. However, there is a dire need for new construction to stay in step with India’s robust 7% economic growth.

Residential Property in India

The most lucrative option by far for turning deals into hard cash is making investments in residential property with end users predominantly driving the market at its best. Everyone needs the basic necessity of life and one of them is called “Home”. Indeed, residential property market makes up for near about 80% of the real estate market in India in terms of volumes and has been shooting up at 34% annually.

After a frenzied residential property boom in nineties era that took place on the back of a booming stock market, the real estate markets loosened their mettle in quick succession between 1994-1995 followed by the years which saw a little or no appreciation in real estate.

Now, there is again a boom in the past 2-3 years with real estate prices appreciating on the back of strong demand. The plots that were lying vacant before have suddenly seem to come to life with making room for new constructions to come up in future years. Moreover, they are making for investment property for millions. With house prices displaying such phenomenal rates of growth, investing in residential property certainly stands for a smart choice. Also, it gives much sense of security than parking money in commercial sector.

However, there is a vast change in every aspect related to property from buying pattern to selling pattern to investment pattern. It is more like a revolution which has brought unlimited choice along with it for both prospective buyers and sellers. Irrespective of whether you are buyer or seller, realm of profit lies ahead for you.

Buying Investment Property

Buying investment or rental property needs a fair degree of planning and commitment. The first step is to assess your financial requirements and goals.

If it's the latter, look for lower priced property that you can fix up as you rent it out.

Steps to secure suitable investment property

STEP 1: Consider being a resident landlord by purchasing a multiunit property and living in one apartment. In many cases, the income from the other unit(s) will cover your mortgage payment, allowing you to effectively live for free. Being on-site has other advantages, including ensuring that the property is well-maintained.

STEP 2: Decide if you want to do maintenance yourself. If you have the skills, equipment and temperament to deal with upset tenants and a backed up toilet at 2 a.m., fine. If you plan on hiring a property manager, add about 5 percent of gross income into your calculations.

STEP 3: Choose the kind of property you want. Single-family houses are generally less expensive than apartment complexes because of pure size, but generate less income. Apartments, on the other hand, can require more upkeep.

STEP 4: Get pre-approved for a mortgage. Financing investment property is different from residential property in that it requires a much larger down payment.

STEP 5: Start shopping: Check out classified ads in the newspaper and online. Find a real estate agent who specializes in commercial or income-generating properties.

STEP 6: Choose property where people want to live, close to shops, parks and decent schools, and in a well-kept neighborhood. There's nothing worse than owning a rental property without any renters. In addition, check out any restrictions on renting with the home owners association, which, if there is one, can have a say in any rental agreements.

STEP 7: Consider what improvements, if any, you may be willing to make. Buying a fixer-upper will be less expensive than a property in pristine condition, but you can go broke bringing a property up to rentable condition. Before you buy, get cost estimates for all necessary fixes.

STEP 8: Have the property inspected. You may also want to order an appraisal to get a fair market value.

STEP 9: Search past records for vacancy rates over the last five to ten years as well as at present. If the building is occupied, find out how long the tenants have lived at the property. Long-term residents are valuable, but may also have been signed on at a lower rental rate.

STEP 10: Plan on spending time and money advertising for and interviewing potential renters. Have a contingency plan in place if a unit remains vacant for a few months.

STEP 11: Determine what a competitive rental rate is for your property by asking rental agents what they would expect to charge, by reviewing area apartment listings, and by personally visiting units available in the neighborhood.

STEP 12: Run the numbers. Make certain that whatever income you derive covers your costs of owning the property, plus a profit.

STEP 13: Work with an attorney to draw up and review any necessary papers relevant to the purchase.

STEP 14: Negotiate the terms of the sale. Some sellers may be willing to pick up a share of closing costs and other expenses. The eventual price will also be affected by prevailing market conditions--keep these in mind when negotiating.

More Tips & Warnings

1. Check to see whether the value of other area properties have increased or decreased in the past five years. Try to buy in an area that's on the way up.
2. Pay attention to when improvements were made to a property, which aids in the estimate of the building's value. Recent renovations are worth more than upgrades done a decade or more ago.
3. Be on the lookout for any hazards common to older properties, such as asbestos, lead-based paint and electrical systems that are not up to code. Budget in reconciling these problems.
4. Some cities offer low interest financing to property owners needing to make renovations. Look into such programs if you know you'll need to have the property painted, windows replaced or similar exterior repairs made.
5. Discuss any tax benefits with a tax specialist. There may be local tax incentives for renovating your property as well as advantageous approaches to declaring your expenses.