Domain Name Business Boom: Perfect Time for Indian Investors
We all know that real estate prices are currently trending at their peak valuations. Buying your home is turning out to be a nightmare. Apart from home buyers, the investors are also facing the heat. With sales falling drastically, the inventory of unsold flats is rising day by day.
Nothing is going right in the physical asset space: High capital cost, inflation rates fluctuations, strict government approvals delaying the process.
Main Reason for shifting towards Digital space
Have you ever thought about the rental yield on your invested physical property?
Rental yield is derived by dividing the annual rent of your house divided by its current market price.
Rental Yield = Annual Rent/ Current Market Price
Let us understand the above concept with the help of an example:
Suppose you purchase a house for INR 50 Lacs and get an annual rent of INR 1 Lac. In this way, the rental yield from your physical asset comes out be 2 per cent.
Cities like Mumbai, NCR-Delhi, Bengaluru, Pune, Kolkata, Chennai, Ahmedabad, and Hyderabad are providing a higher rental yield to the homeowners as compared to other cities. Currently, the rental yield of these cities is a mere 2 per cent. Now, you can decide the dismal state of other cities in India.
If you think the owners are getting good value for their rented property, you are completely wrong. With home loans rates moving around 10%, the rent yield numbers are discouraging. A difference between rent yield and the home loans comes out to be 8 percent shockingly.
The current Indian physical asset industry is in deep problem. Let us understand the concept by revisiting the same example discussed in the beginning.
You already have a property worth INR 50 Lacs. For just reaching a breakeven point, the point at which cost or expenses are equal to the revenue, the investor aims for 10% rental yield. It is possible either by increasing the rental income or decreasing the current market price.
In the first case, the rental income comes out be INR 5 Lacs annually by keeping the same current market price of INR 50 lacs. A monthly rental income of INR 41,667. In the latter case, the market price drops down to INR 10 Lacs by keeping the same rental income of INR 1 lac.
Mind you, we are getting these big numbers for just breaking out even.
The 2 percent yield is very low. Don’t forget we are considering only the top-tier cities of India. Otherwise, the outcome will be more discouraging. For generating a handsome amount of rental income returns, there are two dim possibilities.
Firstly, the property owners can increase the rent. Given the high availability of homes, tenants have an edge over the landlords. This demand-supply imbalance makes the task of increasing the rents next to impossible in the current scenario.
Secondly, there might be a possibility of curbing down the skyrocketing real estate prices. The only possible way to achieve this target is to wipe out the all the black money from the system and provide opportunities to the genuine buyers only. Bringing down the price is easier said than done.
Digital Property Scenario:
An year ago, I bought a domain for $15,000 (INR 10 lacs approx is current market price). It may sound costly to many people. In reality, I am generating a rental income of about INR 2 lac pa from this single domain. In yet another case I paid $1,000 ( INR 66,000 ) and that domain makes a recurring revenue of $1000 per year ( INR 66,000).
This is the magic of domain business.
Apart from the rental income, there’s a very high sales value too, I have flipped (sold) domains for four and five figures in Dollars ($XXXX – $XX,XXX) which I bought for very low. ( $X – $XXX)
Please note just like real estate investment needs a detailed study of the market, domaining also needs lot of research and market analysis before investing.
Reason for making a shift towards Digital Space:
- By the end of 2014, more than 200 million people were accessing the Internet, and the country’s population was more than 1 Billion.
- In the USA, a country with a population of around 300 million, around 87 % of the people use Internet. In India, only 19 % of the people are using the Internet.
It gives a lot of room for the digital market to boom in the Indian Market. At this time, you will get the digital property at a bargain price.
Don’t miss the golden chance of grabbing your digital property. It’s probably the best time to invest in Domain Names!
About the Author: Aishwin Vikhona is an entrepreneur and award winning Domain Name Investor, he runs a startup, focused around Domains, has heavily invested in domains and have also written a book about selling domain names called “Sell Domains Fast“. Follow him on Twitter and Facebook