How would a diversified real portfolio look like?

In case of personal portfolio, it is a combination of real estate, stocks, gold, FD's etc.

It will be good if members can provide their thoughts about a diversified real estate portfolio in percentage terms.

Flats in Tier 1 cities - x%
Land in Tier 1 cities - y%
Land in Tier2/3 cities - z%

etc....
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  • Real Estate portfolio

    It will be great to get some ideas pouring in from our members.
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  • For me Realestate is leverage of finance ( positive geared portfolio ). That is the income from the assets services the loan repayment covering the EMI so I buy the asset but the tenant pays for it. In overseas market like Australia UAE and USA ur leverage is as low 5% however in India the leverage is high. However over a period of 10 years the leverage is brought considerably down.

    Example in 2004 I brought an asset in Bangalore centre for 30 lakhs one third my money two third bank loan EMI was approx 18000 rent was 15000 money from my pocket was 3 grand. Presently it is rented at 35k a month.

    However today in India leverage is way high in residential property 65% ur money however retail and commercial asset the leverage is low around 40% still high
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  • Yeah Septaa. True, the residential rental yields are low nowadays. Land and in some cases residential flats/villa in good location provides growth in value.

    Right now, i did buy a flat (loan of 50% of total value) which isnt delivered yet and a land investment in the suburbs of chennai. Apart from that, i did invest in some land parcels in a tier 2 city (little outer) - close to 25 lacs.

    I would like to know the best ways to build a portfolio which will create growth in value and cashflows over time. Say in another 10 years, i should a decent cashflow say atleast 40-50k in today's value.
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  • @Septaa,

    I thought people in overseas markets like AUS/UAE/Sing/US, etc borrow lot more and leveraged more than India.
    I mean it is common to see 80% or even 90% of the property value on loans.

    I do not see many people in India borrowing to the full.
    Most people buy in cash, or take maybe 50-70% loans. It is not common to see 80+% of property value on loans.

    Lower taxation and lower rates for home loans are also a bigger draw for leverage all over the world.

    Although booking a new flat in India under staggered payment can be considered as leverage.
    But that is also common only in bigger cities like Mumbai, NCR and Bangalore.

    I think Indian consumers are lesser leveraged on RE than people in developed countries.
    Maybe my perception is wrong.

    There is a lot of room for new home loan products in India.
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  • Low interest environment can fuel high leverage and high leverage during high interest environment is suicidal with out proper hedging.
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  • Originally Posted by k11
    @Septaa,

    I thought people in overseas markets like AUS/UAE/Sing/US, etc borrow lot more and leveraged more than India.
    I mean it is common to see 80% or even 90% of the property value on loans.

    I do not see many people in India borrowing to the full.
    Most people buy in cash, or take maybe 50-70% loans. It is not common to see 80+% of property value on loans.

    Lower taxation and lower rates for home loans are also a bigger draw for leverage all over the world.

    Although booking a new flat in India under staggered payment can be considered as leverage.
    But that is also common only in bigger cities like Mumbai, NCR and Bangalore.

    I think Indian consumers are lesser leveraged on RE than people in developed countries.
    Maybe my perception is wrong.

    There is a lot of room for new home loan products in India.


    True one reason is the rental yield rate is high if one take interest only repayment loan option even at 95% leverage the chance that rental will be over interest EMI and capital is paid over time so it does effect the EMI so house loan is like a OD facility worry only abt interest

    K11 sorry if I confused u with 5% leverage I should have actual meant 95% leverage 5% own funds thank u for correcting
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  • So, in order to get decent cash flows - do we need to rule out investing in flats/villas in india to get good rental income and move the thought towards AUS/US etc due to higher rental income?
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  • Originally Posted by VenkatRE
    So, in order to get decent cash flows - do we need to rule out investing in flats/villas in india to get good rental income and move the thought towards AUS/US etc due to higher rental income?

    I think smart money have already moving look at Indians r biggest buyers in USA uk and Dubai however in Australia Chinese r big buyer.
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  • Originally Posted by VenkatRE
    So, in order to get decent cash flows - do we need to rule out investing in flats/villas in india to get good rental income and move the thought towards AUS/US etc due to higher rental income?


    Here are big factors

    Appreciation Prospects - This is biggest one
    Interest/Opportunity Costs
    Rental Yeild
    Monthly Maintainance Fees/Property Tax/Gen Fixing, Painting & Renting Charges
    Capital Gains Tax/Income Taxes on Rent/Tax Benefits on Loan

    Not all foreign countries have had good appreciation like India in the last 10yrs or so.
    Maybe Asian cities like Singapore did. Australia too prob.

    Some places, even in India, rents could be good.
    But you need to include maintainance, taxes, monthly fees, etc.

    Everyone has different parameters, inputs and goals.
    If you are NRI you have options in your country.
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  • Thanks K11. I am looking for flats which provide good rental returns and appreciation which can meet inflation. I do buy plots just for appreciation and flats as a cash flow option.
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  • I wanted to create a cash flow which provides me with at least 40k every month. That's the motive! So I was looking for options where in I can create a decent rental yield.
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  • Rental market is bad everywhere.
    Yeilds are too low nowadays.

    I would rather bet on capital appreciation and inflation helping you than relying on rental market.

    Look at shops/commercial properties. They are harder to fill and rents are low, but now you can buy it at lower price hopefully.
    So yeildwise it might not be bad.

    Target 4-5%, anything more is extremely difficult, even 3% is very good in current market.
    When economy improves, you can get better rents.
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  • Originally Posted by VenkatRE
    I wanted to create a cash flow which provides me with at least 40k every month. That's the motive! So I was looking for options where in I can create a decent rental yield.


    One area were rental yield is high is commercial property however I understand u r only interested in apartment. I presently involved in residential come commercial building in parrys corner for ground floor I am already getting lot of enquire at rs60 to rs 75 rent the land is around 1350 sqft I am doing the ground plus two no set back of any kind so total area of 4000 sqft the apartment will go for 15 so total return on investment is better then FD.
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  • Thanks K11 and Septaa.

    Commercial space - i dont have any information and expertize on how to approach it? Right now i have just started with buying a flat and the remaining investment in land. Looks like i need to learn about commercial space and add that too in the coming years for a balanced approach.
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