There is an emerging trend of wealth management companies expanding their real estate advisory teams. Motilal Oswal’s wealth management and RBS Private Banking have already started planning to expand on the same lines.
Prateek Pant, head of wealth solutions at RBS Private Banking remarked "With equity markets not doing well, HNIs and UHNIs are looking at real estate especially the commercial space, as an investment avenue. We are evaluating the prospect of starting a real estate advisory business."
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Meanwhile Amar Ranu, senior manager, research & advisory (third party products), Motilal Oswal Wealth Management attributed the increasing importance of realty business due to the returns being offered by it.
The Wealth Report 2012 by Knight Frank & Citi Private Bank said real estate is emerging as a favorite investment option for the rich.
In the report, Will Dickens, senior vice-president at Citi Private Bank’s global real estate investment team remarked "Bond style income is in demand, but the debt crisis has trimmed back the number of countries offering triple-A covenants (agreements), encouraging investors to look for viable alternatives."
"With steady income from rent, property offers investors an equivalent of the bond’s coupon payment, but with the possibility of some additional income if rents increase," he added.
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By GlobalDataExperts say that through real estate, investors can earn returns of 9-11%, and with capital appreciation after the initial three years, a total of 15-18% internal rate of return (IRR).
Further, many of the HNI and UHNI clients or promoters of companies, route their investments through their companies or through SPVs / SPEs (special purpose vehicle or entity) for the purpose of tax benefit.
Wealthinsight views that real estate can be a portfolio diversifier as it provides diversity to an investor in terms of style, quality, geography and local economy. And moreover, the correlation between real estate with stocks or bond market is low.
Additionally, as real estate is valued usually on a quarterly basis unlike stocks that are valued on a daily basis, it is less prone to market shocks, hence making it a safer investment.
Investors can also have the benefit of having an investor-tailored portfolio in terms of preference of location, size, characteristics, value and other factors.
In addition, investors have a choice in terms of increasing the value of their real estate investment by making value-additions to it in terms of features.
These cumulative factors make real estate an investment bet for investors in a volatile market environment.
Wealthinsight is of the view that real estate is an emerging opportunity for wealth advisors.
