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Benefits of Real Estate Investment

Posted by India Kutir on February 8, 2020

Importance of property

It is human habit to fight for the things that are limited in nature. Land is one such crucial asset that is limited on this planet. History has witnessed many battles fought for the quest of land. We could not establish a cordial relationship with our neighbours china and Pakistan all because of land dispute.

Understanding real estate

Real estate refers to real or physical property consisting of land and building on it. There are four subtypes of real estate namely housing, retail, hospitality and commercial. Real estate market is expected to reach 1 trillion by 2030 and contribute 13 per cent of country’s GDP by 2025. Significant growth in e-commerce, IT, ITes, hospitality, commercial and retail sector have taken real estate industry to a new height.

Tenant pays The Loan EMI

The first and foremost benefit of investing in real estate is, your tenant actually pays the loan EMI and increases your wealth continuously. Point to be noted here is the value of EMI keeps depreciating whereas the value of the property keeps appreciating. Once the EMI tenure is over, you would have made significant assets that you can sell or continue renting.

Passive income

Most of the people invest in real estate for the continuous cash flow they get in the form of rental income. This continuous income helps you buy other rental property. Due to urbanization the demand for rental property is high. If chosen carefully you can start a steady income. Real estate investment can give you additional benefits as you can list your property on sites like airbnb and Trip villas and earn commercial returns, which not only help the repayment of the EMI but can also become a profitable business after the EMI repayment.

Hedge against Inflation

Unlike every other form of investment, real estate hedge against inflation. Rental income and value appreciation of property certainly hedge inflation. Real estate investors welcome inflation with open arms because as the cost of living goes up, so does their cash flow. When inflation hits our lives everything goes up except fixed rate EMI.

Government initiatives

Government run Real Estate Regulatory Authority also known as RERA is active in every state which protects the interest of the investor. Now builder has to get permission to start construction after fulfilling the entire legal requirement. Now builder has to update possession time before they start the project.

Share vs Real Estate

When you buy share you become the partial owner of a respective company. When company performs well and share price go up, you earn profits. You enter share market to earn high return but it is just like playing a game as the share market is very much out of your control. Real estate on the other hand is tangible asset. Unlike stock, you have full control over real estate as it requires less knowledge to invest as compared to stocks. History shows real estate always appreciates while still generating cash through rental income.

Bonds Vs. Real Estate

Bond is kind of investment that gives you fixed return and does not appreciate over time. Bonds are considered safe investment and they do not offer impressive returns like real estate. Due to fixed nature of return, it is heavily affected by inflation. Real estate on the other hand gain benefits of inflation as rental income and property appreciation increase significantly.

Real Estate Vs. Gold

Gold is a precious metal that never loses its value. People have been investing in gold for long and passing it from one generation to another as means of asset. Gold investment is flexible but limited to your capacity as there is financing option here. The value of gold will appreciate hugely over time but it will not give you other benefits as compared to real estates. On the other hand real estate investment is huge as we have financing options available. Real estate investment is good for regular monthly income.

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