Should you bank on real estate?

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House, PMAY, Home

   Is real estate an ideal investment asset class when compared to gold, equities, MFs, etc.? We tell you why, despite its erratic performance, it is still a prized asset.

Capital appreciation

   Dilkhush Shah, an interior decorator had only Rs 25 lakh to invest. She was advised to opt for mutual funds and gold rather than real estate. However, her research made her realise that real estate stands as an ideal asset class beyond the emotional urge to just own a home. The statistics clearly indicated how no other asset class had given the CAGR (Compounded Annual Growth Rate) as high as property, despite the short-term drop in sentiments.

Leverage

   “I chose to invest in property since it is a time-tested investment globally. Yes, with such a small amount, I could only afford a property at Palghar (Mumbai). Keeping the area’s development in mind, I feel this is the best investment bet,” says Shah.

High control

   The statistics of the ROI, over a long period of investment, have always been in favour of real estate. In the cyclic ups and downs, other asset classes like gold or equity may look more attractive, yet cannot match property.

   “I had invested in some stocks that fell from Rs 300 to Rs 45. Since the said company is on a downslide, there is absolutely no hope of recovering my losses. With property, there can be cyclical ups and downs but if you are determined to stay invested, you will not only recover, but also make gains in the process,” says Anupam Agarwal, a homebuyer who has also invested in a commercial shop.

Returns

   If gold has given returns of 12 percent, residential apartments have given returns of 16 percent and commercial shops have given even higher returns.

Inflation hedging

   Real estate is the best bet against an inflation hedge, as it is the only asset that loses little value in periods of rising prices.

Tax savings

   In investments like mutual funds or insurance, only a limited amount of investment is covered for tax-saving purposes. Also, in other investment instruments like gold, there are no tax-saving benefits as such

Financial freedom

   An investment in property also ensures financial freedom for Indians. Now, with REITs becoming a reality, real estate scores over other asset classes and provides an investor financial freedom

Portfolio diversification

   Despite markets being at a two-year high, only a few stocks are at similar highs – most of them are still languishing. In contrast, the momentum in real estate may have slowed down, yet there has been a constant appreciation in the range of 5-20 percent.

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