Return On Investment(ROI) In Real Estate


Date: 25-July,2019Last Updated: 27-February,2021
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Does Real Estate give a better Return On Investment than other commodities?

The Real Estate Return on Investment is perhaps the biggest ROI ever for a long term investment option out there.

Land has always played a crucial role in shaping history. Wars were fought and kingdoms conquered in the quest for land. Thus it won't be wrong to say that land will never lose its value. The population boom has shrunken the availablilty of land space. In comparison to other long term investment options, realty will always be in demand and offer a higher Return On Investment.

The government has introduced new policies, easing home loan regulations while making loans affordable.This will instill a new confidence to make more investments in the section.

Most people are aware of the fact that Real Estate is the best investment option that can give you guaranteed long-term returns, but only the expense is what deters their desire.

In India, there are four major kinds of investment options in the commodity market: Stocks, Gold, Mutual Funds and Real Estate. Real estate emerges as the best investment option in terms of return on investment and minimal risk.

Real estate is tangible unlike stocks

Land has intrinsic value and is useful by nature. It has natural resources and provides space while allowing you to build a structure on it or grow food. Real estate that produces income is a hard asset that gives the Return On Investment to future investors. A piece of land is capable of providing shelter to someone's head thus having real tangible value. This form of investment won't swing wildly in value causing a slump in your investment like stocks or mutual funds.

Stocks require low investment and promise to offer a high Return On Investment. Despite this, Real Estate remains a comparatively better investment plan. New investors will find it challenging to navigate through the stock market and might end up making unfavourable investment decisions.

Investing in real estate on the other hand is a simpler and hassle-free process. There are plenty of options available that can guide you to make the best investment plan,with your hard-earned money. Since Real Estate is insulated from the conscious fluctuations that stock market experiences, investors are bound to get steady returns.

Making an investment in Real Estate is an important decision which is why one must be sure of how they can put their money in realty. Also there are instances where real estate return on investment can exceed far out of expectations.

Check out this realty checklist before making the invaluable decision of investing in a property.

1. Real estate gives you more control

A property that you invested in can be rented out or leased, if you have decided not to live in it. Thus being a long term investment you are assured of a regular return on investment. If you invest in a company, you are at the mercy of the management who might blow away your investment by making unwise decisions.

2. Real estate is a better investment than gold

Gold has been the most favoured investment in the commodity market for Indians since ages but with the current trends, it is changing. One of the most significant advantages that real estate has over gold is that you don't need to pay 100% of the total value upfront. Homeownership has been made favourable because bank loans are more accessible due to tax cuts announced by the government. For those looking to invest in gold, no such loans have been made available by the bank.Besides real estate return on investment prospects can often double depending on the future infrastructure.

3. Real estate offers tax benefits

Tax deductions offer you short term savings. This is especially true when you have availed a home loan to buy a property. Taxpayers can claim a tax deduction of up to 2 lakhs against interest payment for a self-occupied property under section 24 of the Income Tax act. Recently the government offered tax benefits for first time home buyers under Section 80C with a benefit of 1.5 lakhs on the principal repayment of home loan (for a house worth Rs.40 lakhs).

Looking to get a home loan? Did You Know there are a lot of Tax Benefits which can be availed on Home Loans? Explore Now

4. Real Estate is supported by the government

The government has introduced a series of reforms to encourage more people to invest in real estate. Pradhan Mantri Awas Yojana (PMAY) and Credit Linked Subsidy Scheme (CLSS) provide special subsidies for first time home buyers. Real Estate Regulation and Development Act (RERA) has assured home buyers legitimate certifications and greater protection from fraudulent developers. This also protects real estate return on investment much more than other asset classes.

5. Real Estate is less volatile

Unlike stocks, you would know when the value of your house is tanking and can either wait before selling it off or rent it out. Unlike stocks or gold, you can be assured of the property prices rising in the future. Even if your property price has fallen you can encash on it by leasing it out for 3 to 5 years or rent it out. Real estate is one of the three pillars of survival, the other two being food and clothing.

6. Real Estate is less riskier than Mutual Funds

The knowledge about mutual funds is sparse. There isn't much information available about equity market, wealth building through SIP and the power of compounding. Also not many people understand the difference between saving and investment. Fewer loans are available for investment in mutual funds unlike the wide variety of loan options that the banks provide for buying property. Real estate return on investment also holds the same value as most of the mutual funds. These factors make mutual fund investments riskier than putting your money in real estate.

7. Real Estate is a great retirement plan

Investing in a rental property will help you create a steady and passive income for your golden years. If planned carefully and successfully, a Real Estate investment plan can secure your retirement with a guaranteed Return On Investment. Of course, you’ll need to be systematic and well-informed to make it the best investment option. You can either opt to invest in a second home and get a continuous flow of income or put it out for sale when the price is right. Thus as a long term investment option, the returns or the real estate return on investment serves a great option for your retirement plan.

8. Real Estate doesn't face storage issues

Unlike gold and stock bonds which are movable assets, Real Estate doesn't require resources for storage like bank lockers. An immovable asset is a less risky investment which can be retained and are sure to yield dividends. There is no fear of a Real Estate investment getting stolen or lost like stock bonds or gold.

Real Estate is easy to purchase and finance and there are no unconquerable barriers to it. It’s easy for most investors to improve their properties and tax advantages are provided by the government. While stocks are becoming more and more of a mystery and a gamble, Real Estate is definitely the most stable form of return on investment that one should decide to put their money in as opposed to gold, stocks or mutual funds. Thus Real Estate return on investment is better than any other commodity!

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