“Should I invest in real estate or stocks?” “Real estate investment or stocks - which one is better?” “Is buying properties more profitable than purchasing stocks?” - Such numerous queries hover in an investor’s mind before investing often.
The financial conditions, risk tolerance and investment goals of an individual determine the final decision. But, learning about the two important investment options, namely real estate and stocks, helps to make an informed decision.
Both real estate investment and the stock market have their own pros and cons. However, weighing them at equal parameters, investment experts often suggest real estate investment in India is more profitable than stocks in long term.
You still might be skeptical about it. After all, stocks are likely to give a high return instantly. They are popular as well. Then why is real estate investment considered better?
To clear your doubts, here we will be sharing the details of it. Let’s know the prominent reasons why experts suggest going for real estate investment over stocks.
Also, you will learn about the interconnection between the stock market and the real estate industry. Alongside this, you will get to know how to leverage it to maximize your profit count. Finally, we will address some of your commonly asked questions on real estate investment and stocks.
Real estate investment is the investment in residential, commercial or industrial lands and buildings. On the other hand, the stock market is an investment platform where companies trade their shares or stocks in return of investment. While stocks are able to give you an instant, high return on your investments in some cases, real estate investment has its own perks. The reasons why investing in real estate is better than stocks are:
Though it doesn’t offer an instant return, the returns on real estate investment are guaranteed because of the never ending demand and unmatched supply. And you can expect it to provide you with a high return in the long term.
The stock market is always unpredictable because of its dependence of various factors like government policies, political scenario, climate and environment etc. So your return from it is also uncertain.
While real estate is an evergreen market and there is huge mismatch between the demand and the supply. So, the growth in real estate sector is never ending. Hence, investing in real estate is ideal for the first-time investors and many seasoned individuals.
Considering the amount of research required and illiquidity, real estate investment consultants always warn about the possible risks in real estate.
However, despite all these risks, real estate investment is safer than stocks. The stock market investment comes with diverse types of risks, including economic and market risks. Stock values are volatile depending on market fluctuations.
Different geopolitical and company events may impact such fluctuations. Instead of relying solely on high-yielding dividends, you need to diversify your stock holdings to reduce the risks. Nonetheless, investing in real estate assets can save you from such risks.
Diversification is a strategy to include diverse types of investments within a portfolio to reduce risks. Although stocks have room for diversification too but real estate gives you easy and ample opportunities for it.
Under real estate, you can invest in residential and commercial lands, villas, apartments, commercial resorts, restaurants, hospitality outlets etc. Also, you can invest in mineral deposits, agricultural lands, livestock, etc. Each of them is ideal for giving you a high return in the long term. Moreover, you can opt for REITs or real estate investment trusts.
Real estate is the best option to earn a stable cash flow even in an inflationary period. For example, if you own a home already, you can rent your second home at a higher rate during inflation. People prefer to give a high rent than opt for high-interest home loans from banks at these times.
Thus, you, as a homeowner, can earn a stable passive income from your real estate assets even if inflation disturbs the whole economy. Commercial property developers and investors can also count profits during inflation as office and retail leases go up at this time.
Another reason why real estate investment experts often argue in favour of real estate investment is tax benefits. There are several scopes of tax deductions for homeowners. As per the recent financial budget, you can save up to 2 lakhs taxes on your home loan under Section 24, depending on certain conditions.
Also, you can save up to 1.5 lakh under section 80EEA. If you take the loan jointly, both the loan holders can claim a deduction. So, buying properties with your spouse can save your home loan taxes to a great extent.
In this regard, real estate is mostly one step ahead of than stock market. If you buy land in today’s tier-1 or tier-2 cities, you can expect around 7-10% annual appreciation. For residential properties, the resale value becomes almost double of the purchase price within 15-20 years. On the contrary, stock investment stays at perpetual risks always due to its volatile nature.
Stock markets impact the real estate sector in some factors like credit facility, customer behaviour, and so on. During the downward growth of the stock market, it becomes difficult to get necessary credit disbursed from banks. When the stock market is in good condition, developers can get credit easily at a low interest rate.
Also, a rising stock market boosts consumers’ confidence in the economy and their inclination to invest. When the situation is not good, they prefer to save money than purchase any asset. REITs are also there, building a sustainable bridge between the stock market and the real estate industry.
REITs are companies that buy a whole real estate asset and sell in small shares. When you purchase a share, you own that small part of the asset. Thus, you can invest in real estate with a small capital.
Both real estate and stocks come with different sorts of risks and benefits. If you do not research the location, amenities and market appreciation properly, buying properties may lead to losses. Also, you cannot easily liquidate your real estate assets.
Moreover, the investment requires a larger capital and more time than stocks. However, the advantages of real estate investments many times overpower the stocks investment. For example, it can provide you with a consistent stable income stream. Also, it assures a substantial value appreciation.
So, buying properties is profitable indeed. Visit your reliable property consultants and start investing in real estate today.
There is no hard and fast rule about the minimum amount for real estate investment in India. However, according to renowned property advisors, you should start with a minimum of 25-30 lakhs initially.
Yes, you can. SEBI, or the Securities Exchange Board of India, has revised the REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) Regulations, 2014. According to the revised regulations, you may now start investing in real estate with as little as Rs 10,000.
There are all kinds of properties available in all locations. The price of the properties vary according to the location, amenities, and size etc. You should consult with reliable real estate investment experts before you opt for properties at any location.
While purchasing an investment property, it is essential to decide its value first. You can do it by conducting a comparative market analysis. It means learning about previously sold properties of similar kinds. Also, it includes in-depth knowledge about other listed properties at the same time.
You can buy a property by yourself. But, working with a real estate agent helps you make your decisions efficiently and quickly. The process of buying properties needs a considerable amount of time and effort.
The tasks, including negotiating the deals, dealing with transaction documents, getting a loan, and so on, are tiresome indeed. Only professional property consultants can guide you to the best in this matter.
