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For Indian families, the age-old conundrum has always been: Which comes first? Gold or property? Let’s try to approach the problem from a different perspective.
Indians are renowned for having strong feelings and attachments to certain things. Family or the idea of family is undoubtedly one of them and has sustained us. Gold and/or real estate are the alternative. In India, purchasing a property is more than just a pragmatic decision. It’s a sentimental and emotional choice, and these feelings will likely only intensify with time. But it’s only their primary residence. Even talking about buying a second home or investing in real estate arouses feelings in India. At the same time, we Indians have a solid attachment to gold.
The crucial question is now: Which is the best option for investors? Gold or real estate? Both are unquestionably the best investment choices for the majority of people. Real estate has always been perceived as an asset-building strategy and has long been linked to feelings of stability and comfort for the future. Over the years, a number of investors have also viewed gold as a source of protection or comfort. Let’s get to the point without further ado.
Gold vs. Real Estate – Initial Opinions
If you ask a few serious investors in India, gold has historically served as a buffer against future inflation. It remains an essential part of practically all financial portfolios in the nation. Along with social and inflationary hazards, financial risks brought on by economic and geopolitical crises are also being addressed by it. Many analysts claim that gold offers something special compared to many other asset classes because it typically increases when stocks begin to decline.
On the other hand, real estate has a reputation for providing greater long-term returns, capital growth, and asset stability while also opening up new revenue streams through rental yields. Real estate experts are adamant that investors can gain from it in two ways: price appreciation and rental income and tax advantages. At the same time, it is a durable asset that may be passed down to the next generation, increasing their level of financial stability.
Here are some pointers worth noting in this regard:
- One of gold’s main USPs is that you can always invest as much as you wish. When it comes to your investment, there is always flexibility. If you are not comfortable at the time, you do not always have to invest a lump sum. It is entirely up to you whether you choose to invest a few thousand rupees or purchase gold with several crores of rupees.
- Gold also offers more liquidity advantages. Selling off your gold won’t be challenging for you.
- The sale of a large-ticket piece of real estate typically takes a long time because of the low liquidity of the market.
- At the same time, most real estate purchases demand lump sum investments, and many people must take out loans to buy properties. Investment flexibility is not there in the case of this investment.
- However, real estate has a long-term strategy at play; it will lead to capital appreciation, and owners can make good money by selling the property if they choose. Alternatively, they can generate rental revenue to recover their investment and pay back the loan all at once.
- Gold is viewed as extremely auspicious in most Indian families and has significantly lesser volatility. However, investors are aware that it lacks a wide range of real estate benefits.
Purpose-Wise Comparison
Earning Side Income
You can always earn side money with your real estate investment. Whether renting a commercial or residential property, you can benefit from tax breaks and generate revenue. Real estate can continue to provide you with consistent monthly rentals and annual appreciation, which is not achievable with gold investments.
Rates of Return
This is a risky situation. Real estate markets frequently experience fluctuations, but because rentals are increasing in some locations, real estate may still provide returns of up to 15% yearly. However, the residential category may also barely grow by 2-3% annually in some markets. Although it is employed as a buffer against constantly growing inflation rates, gold is extremely fickle.
The risk or Market Volatility Levels
Many analysts believe real estate is more stable than gold. Price decreases or brief slumps can occur. Prices might also stay the same for a while. But in the end, it will guarantee everyone’s future. Gold is a commodity, not a particularly substantial or tangible asset. Because it is traded on the marketplace daily, there is more volatility. Due to theft, breakage, etc., gold is at a more significant risk than other commodities.
Added Costs
Once you buy gold, you won’t have to pay any other costs. This is a significant benefit of purchasing the priceless yellow metal. However, real estate comes with a fair share of extra costs. First, you must pay stamp duty and registration fees when ownership changes.
This is accompanied by regular maintenance fees, property taxes, and fees for society amenities and parking spaces, which can be expensive in big cities. Second, regularly maintaining and renovating your property will cost you a lot of money. However, keeping up with repairs will raise the property’s worth and help your taxes simultaneously.
Future Value-Building
It goes without saying that property values increase with time. Real estate belongings will be worth more to you in the future if you hang onto them for a more extended period of time. This is founded on the straightforward tenet that land is never in abundant supply and cannot be newly created. As a result, the price of real estate will always rise with demand and population growth.
However, today gold may be purchased both physically and online. Although the likelihood of a loss may be reduced, the asset is still intangible. Real estate can generate long-term value, but gold cannot. Take into account both the rates of appreciation and the amount you have saved in tax benefits throughout the years on the property. Property values have occasionally increased by more than 300% in developing areas. For instance, a home that cost Rs. 10 lakh in a developing neighborhood ten years ago would cost Rs. 30 lakh today. Gold is unable to offer this level of return.
Economic Boost
Although investing in real estate may demand a larger initial investment, it is one of the leading forces behind the nation’s economic expansion. This industry is crucial to cement, steel, finance, building materials, and many other industries, and it also generates numerous indirect job possibilities. Although the gold sector is essential, it does not have the reach and influence of real estate in promoting economic growth.
Tax Deductions and Other Benefits
Investing in real estate has several tax advantages. According to Sections 80C and 24, you are eligible for deductions for principal and interest payments on house loans up to Rs. 1.5 lakh and Rs. 2 lakh, respectively. In addition to several incentives for affordable housing, such as PMAY interest subsidies, lower GST rates, and so on, there are additional discounts for first-time homeowners. You should also take into mind the fact that buying gold does not offer any similar tax advantages.
Suggestion: Godrej Connaught One – Luxury Project in Delhi
What You Should Do
Real estate is always a better solution for safeguarding your future and the future generations of your family. Building an asset that will provide income in the future for the following generation will ensure your family’s financial security for years to come. In addition, you can anticipate significant returns on your investment through the growth of your capital over the course of 10 to 15 years. You may also maintain the value of your asset over time through routine upkeep and remodeling. You will simultaneously receive tax advantages for buying real estate and be able to profit from it by renting it out.
In many circumstances, this will assist you in repaying the EMI while eventually helping you recoup your investment. Additionally, rental rates increase annually, increasing your return on investment. It’s usually a good idea to buy gold, especially if you think it’s lucky.
It cannot, however, be a substitute for real estate. However, one thing to remember is that before making a real estate investment, you should perform your research and due diligence. You should be ready to shoulder the financial burden over the long term, and there should be a clear value offer. It will eventually yield significant rewards. When investing in gold, you don’t always need to conduct as much research as you think. The straightforward rule is always to buy cheap and sell high when it comes to the yellow metal!
