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 home-buyer
who has also invested in a commercial shop.
Advantage real estate
It's the only asset class after gold that has been risk-free; Back of
the envelope calculation, of the last three decades, suggests that real
estate has outperformed all other asset classes; Real estate has the
additional advantage of impressive rental returns; It's the only asset
class that can be either consumed for self-use or earned for recurring
returns.
RETURNS
If gold has given returns of 12 per cent, residential apartments
have given returns of 16 per cent 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 taxsaving 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 twoyear 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 per cent.
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