Posted on 05 Sep 2020
Money is the most primary need of humans even before food, clothes and home. From ancient times, humans tend to save money or purchase precious stones and jewellery as a form of investment. But, as evolution started in every part of the world. It brings changes in both technical and non-technical fields and also influences our lifestyle. Earlier we used to save money at home but, today we save it in banks. Similarly, investments are no longer related to gold only as investment opportunities have also been increasing.
Today, many investment options are available not only for investors but for a middle-income person too. From stock markets to start-ups to real-estate and so on, there are many ways in which you can invest money. But the question arises 'which is the best form of investment?'
Best investment means higher returns with calculated risks. In this competitive era, it is hard to make money. Thus, investors, be it regular or middle-income men are careful. It has been evident for a long time that stock markets are highly risky as they keep fluctuating and sensitive to dynamic market conditions; you cannot predict returns unless you are an expert. Whereas, real-estate investments give high returns at calculated risk. Not only this, but there are also many reasons why real –estate is the best investment.
Why you should invest in real-estate
Real –estate investments are self-sustaining assets. There are many advantages to it.
Appreciation in the price– Real-estate market is the free market. Its pricing affects the market forces demand and supply. There has always been a demand for property which increases the price of a property. It is a fact that the rate of a property increases with the pace of development around its locality. Therefore, it is a safe investment; whenever you want you can sell your property as you will always get a good price against it.
Diversity in the portfolio – Investors nowadays look for diversified portfolios instead of a conservative one. They look for assets which have different betas (x<1.0
Leverage – In terms of real –estate, leverage means to use borrowed capital to purchase a property. It helps investors to manage their risks. It is no longer a tool for business only. One can increase their returns by leveraging their property only if you are paying less to complete a loan than what you are getting from the purchased property. For example, you took a loan at 7% interest rate and rate of return from an investment property is 11%, it means you are earning 4% (11-7) more on borrower’s money.
Tax advantage – If you took the property on loans then as per Indian Income Tax Act 1961, under Section 80C, an individual is allowed to have tax deduction on the amount paid as principal of home loans; up to amount 1.50 Lac one can claim a tax deduction. Because of this benefit the people who don’t need to go for a loan for having a property, take home loans. Also, under Section – 54, you can avail tax benefit for the investment in house property.
The benefit of depreciation accounting – Depreciation is a non-cash expense but in reality, it is a tool to aid tax benefits. The depreciation on real –estate allows you to claim for a tax deduction while filing an income tax return. But in actuality, the value of your investment property appreciates. It decreases the tax liability for investors and improves their cash flows. It gives a higher return to property buyers.
Improvable asset – Real-estates is the improvable assets as they are tangible, one can maintain it and improve it to make it more worthy. On the contrary securities in the stock market completely depend on corporate management and market fluctuations. And, if you polish gold then, it will reduce its weight. Hence you can easily increase the value of a property by doing some renovations.
Real estate investment increases your wealth and its risks are predictable. One can easily enter into this market as there are no financial barriers and easy to purchase. As compared to other investment opportunities, real-estate is much stable and safe not forgetting it also gives higher returns.
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