Wealth Guide: Real Estate Investment Vs Stocks, Fixed Deposit, Gold, Mutual Funds - Comparison by expert

"Investing in real estate offers relatively lower risks and has a greater scope for diversification as compared to other asset classes."

With uncertainty prevailing due to COVID-19, investing in real estate properties has become crucial for some and things will get better from here on in. To grasp the full scope of the phenomena, we must first examine how the realty market has changed over time and currently attracts more investment than before. Rohan Khatau, Director, CCI PROJECTS PVT.LTD, shares his knowledge on realty sector investment and does a comparison on Real Estate Investment Vs Other Investments.

"Investing in real estate offers relatively lower risks and has a greater scope for diversification as compared to other asset classes. In uncertain times, it also provides for a steady income stream. Being less volatile than market-driven investments, it is a safer bet in the current scenario. Thus, instead of looking for investments with quick returns, it is recommended to select long-term investment options like real estate over others," Rohan Khatau said.

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Real Estate Vs Stocks

"As per an investment report, only 25% of the country’s population seems to opt for investing in stocks. Interestingly, 72% of buyers in cities like Mumbai, Bengaluru, and Hyderabad still prefer investing in property, of which, 44% have not changed their minds. Stock values are incredibly volatile and are subject to several risks - market, economic, and inflation. External impacts on the economic cycle as well as monetary policy, regulations, tax revisions, and interest rates set by the RBI also add to the volatility.

Therefore, for many prospective investors, real estate has always been more appealing because it is a tangible asset that can be controlled, with the added benefit of diversification. Since real estate is not traded on an exchange, prices don’t fluctuate as much due to market forces. Thus, investment in real estate has not seen a drastic decline. It has been strengthened by lower interest rates on home loans and a renewed perception of people towards owning a stable home," Khatau added.

Real Estate Vs Fixed Deposits

"Fixed deposits only provide straightforward returns, with interest rates ranging from 8% to 9% over a three to five-year period. Well, if one is looking for a fixed income avenue, now is the right time to invest in a property. The real estate industry is currently witnessing one of the lowest home loan interest rates in decades, thereby reducing equated monthly installments of borrowers and also making it easier to take new home loans," he added.

Real Estate Vs Gold

"Though gold is among the top 3 preferred choices for investors, it remains well below par as compared to real estate. With inflation fluctuating around 5-7% annually, the return on gold as an asset class has been almost negative. Additionally, to ensure high long-term investments, real estate provides a high return on investment while small saving schemes or gold offers short-term low to medium returns. Physical assets always provide the highest sense of security and with the current market offerings wherein one is spoilt for choice, first-time homebuyers are being presented with offers they can’t refuse," he suggested.

Real Estate Vs Mutual Funds

"When it comes to long-term investments, some people choose mutual funds, while others prefer real estate. Mutual funds are also subject to market risk and the returns are tied to the performance of markets. While all investment products have their gains and losses, one's decision should be guided by measures such as return potential, consistency, security, and budget constraints. This is not the case, however, with real estate assets as the value remains intact, and unlike mutual funds, the volatility is relatively muted.
Hence, individuals need not be just investors but have to be smart investors making prudent decisions that can yield better returns and multiply their wealth," he concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)

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