Investing in Real Estate vs other Asset Classes — Pros and Cons

There is always an opportunity to invest in financial assets and the current time is no different.
The economy of India is still robust, although there are some worrying clouds over the global financial markets. In fact, the Indian economy is the fastest-growing economy in the world now.
Almost all economy watchers and international institutions are extremely upbeat on India. There is a consensus that the Indian economy with continue to do well in decades to come.
However, we must remember that the interest rate is largely cyclical and is dependent on inflation to a large extent. Higher inflation depresses some assets while some other assets get a fillip.
Does that mean the assets that are depressed today will remain depressed forever?
Actually, no.
They will again come to favour after the interest rate cycle turns around.
At this point in time, what is the best way to invest?
What are the best asset classes, and the best sectors?
How to make sure that you do not lose money because of the vagaries of the financial markets?
We will discuss all of that first let us consider the most important aspect of investing.
Keeping Your Money Safe
While considering investment opportunities, what is the most important factor you must consider?
The one factor you must not overlook ever.
It is the safety of your money.
Under no circumstances, you should accept permanent loss of capital.
Permanent loss of capital usually takes place when you invest in questionable companies in the stock market without much research and information.
If you do not have time to do that, it is better to invest through the mutual fund route.
Beating Inflation
In a developing country like India, inflation is the scourge that reduces the purchasing power of your savings.
These days, even the developed countries are facing relatively higher inflation compared to their historical averages.
High inflation reduces the value of your savings over time and therefore you must invest in financial assets that protect your savings from inflation.
You need to be prepared for substantial expenditure later in our live — children’s education, marriage, retirement, etc.
If your savings reduces in value over time, over the years the decline will be substantial and you will be hard-pressed to meet these expenses.
There are some financial instruments that will help you to beat inflation and some will not.
We will understand them in detail.
Investing in Equities/Mutual Funds
Investment in the stock market carries the maximum risk among all the asset classes, but it also offers maximum reward.
Over a long period, e. g. more than a decade, equities usually outperform other asset classes. It also beats inflation by a handsome margin.
The problem is that most of us do not have the time or inclination to figure out the financial prospects of different companies. Individual investors rarely have a great risk management framework.
Equity mutual fund is the answer to their problem.
Apart from great long-term returns on investment, equity investment provides excellent liquidity.There are schemes whereby you can save income tax also.
However, equity investment is volatile, and you might find it uncomfortable to see your investment value go up and down on a daily basis.
Investing in a High Interest Rate Environment
In a high interest rate environment, the equity market remains depresses and bank fixed deposits (FD), while hard assets like gold and real estate remain stable.
One great advantage of investing in bank fixed deposits is that you can invest almost any amount, whether small or big.
It is also a good idea to invest a part of your money in bank fixed deposit at a higher interest rate.
Fixed deposits offer stable interest income and they can be encashed in a short time with some penalty. Also, there is no fear of losing your hard-earned money in a scheduled bank.
However, bank fixed deposits fail to beat inflation over a long period, especially after paying applicable income tax.
Investing in Gold
Traditionally, we Indians invested in gold and the trend is forever.
Gold gives a great sense of safety, and it is highly liquid asset. You can buy or sell gold rather easily and fast.
However, there is a downside of investing in gold.
Usually, investment in gold is done in the form of ornaments.
But there is often a question on the purity of gold and additionally, the making charge for ornaments is the cost which cannot be recovered when you go to sell these ornaments.
Nowadays, there is also the also the option of investing in gold exchange traded funds (ETF). They offer the benefit of fast transaction.
RBI also issues the Sovereign Gold Bonds from time to time for easy investment in gold.
The Sovereign Gold Bonds offer a superior alternative to holding gold in physical form. The risks and costs of storage are eliminated.
With these bonds, you can enjoy capital appreciation and also earn interest every year, besides getting inflation-matching returns.
Real Estate Investment Opportunities Now
Indian real estate market is very stable.
Moreover, investment in real estate can offer capital gains as well as regular rental income. No other investment offers capital gains and monthly cash flow at the same time.
Over the years, prices of real estate appreciate, and in the long term the returns on investment easily beat inflation.
Sometimes, real estate prices do not move much for some time, but it goes up eventually.
Investing in real estate offers the highest safety. After all, nobody can steal your apartment or land.
Let us dive a little deeper.
India is entering into a period of fast economic growth. Massive urban infrastructure will be created during the period of Amrit Kaal.
A mind-boggling amount of Rs 10 lakh crore is allocated for infrastructure investment in 2023-24 Union Budget.
This will hasten the pace of urbanisation in our country and consequently, real estate sector will get a huge boost.
As high interest rate regime usually keeps real estate prices in check, this is the best time to invest in properties.
Once the interest rate cycle turns, the prices of properties will surely go up.
Opportunities in Kolkata Property Market
Kolkata property market experiences very little volatility and is good for long-term investment.
Apart from investing in residential real estate, there are ample opportunities to invest in commercial properties — office and retail spaces.
There are also opportunities to invest in the logistic sector and earn handsome rental income.
However, commercial properties are of higher ticket size than residential properties.
It is always better to invest in under-construction properties as they offer price appreciation as they approach completion.
You can contact us to learn about great real estate investment opportunities based on your requirements.
Conclusion
There are always great investment opportunities at any point in time.
Even at this time when there are economic turbulence worldwide, there are lucrative investment avenues in India.
Real estate offers amazing investment opportunities right now as the prices are stable and you can buy assets at decent prices.
Property investment offers tremendous prospect of capital gains and regular rental income.
Contact us today to know more.