Gold has always been a favorite investment vehicle of Indian households as many people transfer the yellow metal from one generation to another. The biggest advantage of Gold is that one can be flexible with investment size or the amount. Whether you have to put in Rs1000 or Rs 1 crore +, gold is accessible to everyone to buy. Also, gold is highly liquid.
Real Estate also scores high for investment purposes but in comparison to gold, real estate requires bigger funds and the buyer needs to have long holding power. Well, real estate can be an attractive long-term investment option where the property value increases over time. So, if approached in the right way, real estate can deliver you incredible profits.
The one thing that is common between gold and real estate is that both have a strong sentimental value for the Indian investors, with strong reliability and sustained nature. So how do you choose where to spend your money if you have a sizeable amount to invest?
Well, I would recommend real estate any day as there is the various reason why real estate scores over gold. Let’s have a look at them:
Real estate has the potential to create regular income with additional tax benefits. Whether residential or commercial, real estate has the potential to generate passive income for the investors in form of monthly rentals in cash, which gold investments cannot do.
Rate of Return
History suggests that real estate can give up to 15 percent of annual return, thanks to rising rentals. The value of property improves with the market and economy. On the other hand, gold is used to hedge against inflation, which means that the return from gold is in line with the inflation, which is aimed low by all governments. Also, gold shines, when your paper currency is depreciated, making the return nominal.
Volatility and Risk
Real Estate is a highly stable investment option, which comes with low risk. Property brings mental satisfaction due to it securing your future. On the other hand, gold is a commodity, which is traded on the bourses. It comes with higher volatility and risks of being stolen.
Expenses add to the Value
One may argue the property incurs the cost of maintenance and renovations, unlike gold which is altered at will. However, this cost not only appreciates your asset but also allows you to take taxation benefits.
Long-term Value Creation
It is a no-brainer that the value of real estate increases, the longer you hold it. It is simply because you can not create land and with a rising population, the demand increases, which ultimately leads to price rise. On the other hand, gold can be purchased in digital form as well. This might reduce the risk of being stolen but still is an intangible asset.
Aids the Economy
Real estate might require large funds, but the survival of a lot of sectors depends upon it. From debt servicing, cement, housing finance, building materials, and various others depend upon real estate at large. It also creates a large number of informal and indirect employment opportunities, serving the economy at large.
The investment in real estate comes with numerous tax benefits such as tax deduction on mortgage interest, operating expenses and legal costs, property taxes, and depreciation.
The real estate investment is not only a safe investment but can generate better returns over a period of time while you are still earning a regular income if you are using it as a rental property. It is a great investment option for many reasons such as a fantastic tax advantage, and you can leverage it to build wealth and assets.
Annuj Goel is Chairman & MD Goel Ganga Developments