Home » News » Real Estate

Presents

Co-Sponsored by

In Association With

Source: Moneycontrol.com

3 reasons why young investors should invest in real estate

One of the most frequent advices that can be given to the youth when it comes to investment is starting young. And just because, the advice is so frequent, most of us tend to forget that it is actually the BEST advice anyone can be given.

Runjhun Noopur
Akosha is an online
consumer forum

One of the most frequent advices that can be given to the youth when it comes to investment is starting young. And just because, the advice is so frequent, most of us tend to forget that it is actually the BEST advice anyone can be given.

Why is starting young so important? The answer is hardly rocket science. By the sheer luxury of time that youth has on hand in terms of the period of investment, the risk appetite is multiplied several times which in turn leads to investments that by design are high risk, high returns. At a simpler level, starting young means you have a lot scope for distributing your investments over a long period of time, ultimately leading to a substantial increase in the net amount invested. At a still simpler level, starting young means your money has that more time to grow and hence, higher returns.

While this common wisdom has had many young investors coming into the market, investing largely in equities and debt instruments , real estate continues to be an area out of the purview of the obvious choice of the investors. Going by the volatile nature of the economy these days however, real estate has rapidly emerged as a mode of investment that should ideally be on the top of the investment priority list, especially for the young investors. We give you a lowdown on the reasons why real estate should be preferred by the youth.

The Anti-Inflation Investment - Real estate investments are an almost guaranteed way to get around inflation. Real estate is growing market, more so because of the rapidly shrinking supply of land. You only have to go house hunting in a city like Mumbai to know the extent of land shortage in the country. A shortage supply logically means a growth in market and so long as this shortage persists, the market shall not slow down. The core point here is a careful market research before investing into the real estate. You can hardly expect your money to grow exponentially if you chose to invest your money in a landed property in remote UP. It shall still grow but not as much as it would in a more favorable location like Mumbai or Delhi-NCR. There are other considerations too, which need to be taken into account. For instance, in cities like Pune and Gurgaon, which thrive on floating population, investing in residential properties that can be leased out at a later stage is a good strategy.

These examples are illustrative. The moot point here is that investment in real estate can be an excellent strategy for the young investors to get past inflation. The essential corollary is proper market research and careful consideration before investment. Read up, ask around and ask plenty of questions. If you there is any doubt about importance of market research, read all that can go wrong with your real estate investment 6 Things Your Builder Can't Do But Still Does.

Affordable Option - Yes, you read it right. Contrary to the popular perception, investing in real estate is actually one of the more affordable options with banks funding up to 80% of the cost. The young investors also get income tax benefits. A slightly more complex benefit is derived from the fact that young investors are expected to pay fixed installments over years which in effect amounts to purchasing an asset at a lower cost, whose value is bound to appreciate while the investor's own income too keeps rising. For those young investors looking to discipline their investments, servicing regular EMIs is an excellent method. Of course, real estate is a volatile asset but from a reasonable perspective, it is still a safer bet than stock markets, especially when trade pundits across board have been reiterating the fact that the probability of appreciation in case of real estate investments is very high.

Tangible Assets - This is not exactly an objective benefit but may hold significant importance in several cases. Unlike old times when owning house marked a definite landmark in one's life, young investors can now enjoy the benefits of a tangible asset pretty early on in their lives. If the property is a residential one meant for personal purposes, the obvious benefits are manifold. In several cases, the investors' end up paying an EMI which is only slightly more or almost equal to the rent they would be paying otherwise, with an added benefit of actually residing in their 'own' place.

As we had stated earlier, real estate is a volatile option, even if relatively less so. And hence, the prudent way ahead is to make real estate one of the modes of investment in your portfolio and not the only one. An ideal portfolio has a balanced distribution between various options and irrespective of the benefits or the risk factors, concentration of wealth in any mode is problematic. The ideal way ahead is to start off with SIPs (systematic investment plans) and gradually proceed to real estate, as and when you reasonably acquire enough spare wealth to distribute between various investment options. The key is to be prudent with your money and invest as soon as you possibly can. And while investing in real estate, always remember, an aware investment is the only safe investment and a thorough market research is a must.

ADS BY GOOGLE

Ask the Experts

Get your Personal Finance queries answered

  • Q

    If I put Rs 2 lakh in PPF, how much tax rebate I will get?

    A

    As per the existing guidelines and rules a person cannot deposit more than 1.5 lacs in one PPF account. However you can deposit money in the...

  • Q

    Interest rates are going to go down. And all my fixed deposits will be maturing next year. I will have to renew my fixed deposits next year at lower rate of interest. What is the way out?

    A

    Interest rates keep fluctuating due to various micro- and macro- economic factors. There is never an ideal rate of interest. In a high inter...

  • Q

    I want to buy online term life insuance plan. Which is the best one? Should I go for single premium or regular premium policy?

    A

    Single premium term insurance policies don?t make much sense. Why pay such a large amount at one go when you have the option of paying in sm...

  • Q

    I want to invest some money with at least ten years view. I dont want share market risk. Can I invest in NSC? Is there any other investment option?

    A

    NSC or National Savings Certificate is a safe investment scheme offered by the Central Government. It is an ideal option for investors with ...

  • Q

    Is it a good idea to invest in asset allocation funds? if yes, please suggest some good fund to invest money. I am 35 years old and can invest Rs 10000 per month.

    A

    Asset Allocation Funds are for those investors who want to take an exposure into different asset classes but do not wish to create their own...

  • Q

    My CA says that I have to pay tax on interest accrued on my FD of Rs 20 lakh. I have submitted form 15H in all banks. Is it necessary to pay tax in this case?

    A

    In case of interest on fixed deposits which is taxable under the head ?Income from other Sources? a taxpayer has two choices. Either you can...

  • Q

    Please suggest a good investment option of land in South India. I want to buy a land parcel of around 2 acres.

    A

    If you take a look at the South Indian real estate market, Bangalore has emerged as a clear winner. Due to the strong presence of IT/ITeS an...

  • Q

    I want to invest Rs 20000 per month. I have identified Reliance Small Cap Fund and DSPBR Micro cap fund for investment. I can hold to investments for two years. Is it a good idea to invest in these schemes? How much returns I will be getting?

    A

    If you are an aggressive investor, you can consider investing in either of the 2 funds.DSPBR Micro Cap My suggestion is that if you are inve...

  • Q

    I want to save my money for retirment Please suggest a good insurance policy

    A

    For retirement it is advisable to use multiple investment instruments and not just life insurance policies. If you have 15 years or so for r...

  • Q

    IS IT a Good time to invest in GOLD ?

    A

    Currently the outlook for gold is bearish/negative. However if you are planning for a long-term investment in gold it is ideal to invest the...

  • Q

    I have retired from my job in November. I have got Rs 48 lakh from my employers, by way of epf, gratuity and other benefits. Should i invest in senior citizen scheme of LIC? How about pension plans from LIC?

    A

    1. You can invest Post office Senior Citizen Scheme. 2. You also should invest lumpsome in MIP in post office and get monthly interest. 3. K...

  • Q

    I want to save Rs 1 crore for my retirement when i turn 60. Now I am 42 years old and have fixed deposits worth Rs 18 lakh.What should I do to reach Rs 1 cr mark?

    A

    start investing a minimum 5000 per month in mutual fund and increase 10% to 20% every year....

  • Q

    I want to save on my utility bills and fuel expenses.Please suggest a good credit card for me.

    A

    Yes, you will be able to save on Utility bills and fuel expenses through the cash back schemes offered by some of the credit card companies....

  • Q

    Suggest couple of equity mutual funds for me. I am keen to invest Rs 25000 per month for next couple of years. I can remain invested for at least five years?

    A

    Asset Allocation Funds are for those investors who want to take an exposure into different asset classes but do not wish to create their own...

  • Q

    I am a senior citizen.I received interest of Rs .1,70,000/- on FD.I have duly filled 15G form.I have NO other source of income.Have I to pay Income tax on this interest or can it be excempted?

    A

    Sir, please note if you are less than 80 years but more than 60 years of age, your total income upto Rs 3,00,000 is exempt from tax, you are...

  • Q

    Please suggest a good money back policy for me. I am 27 years old and want to accumulate Rs 10lakh over 10 years.

    A

    If you are a fan of traditional money back policies, go in for the LIC New Money Back Policy of 20 or 25 years. I would suggest you go in fo...

  • Q

    I want to buy a life insurance for my brother Please suggest a good policy. He is 19 years old. he should get Rs 5 lakh when he turns 25 years.

    A

    Best to go in for a ULIP in case he is looking to grow the money also. Go in for a ULIP like HDFC Click 2 Invest which is very low on charge...

  • Q

    In 2013, I bought an Endowment policy from LIC. Premium for that is around 35K per year. Now i understand, this was a big mistake and i want to go for a term insurance policy. I have already paid two premiums in 2013 and 2014 and I want to make this policy paid-up. Can i pay one more premium this year and make that endowment policy paid-up ? Or is there any better alternative ? Please suggest.

    A

    Yes, you can convert to a paid-up policy after 3 years premiums have been paid. I would recommend that you surrender the plan and take back ...

  • Q

    Is zero depreciation cover a good option under auto insurance? I have plans to buy honda city in January

    A

    Zero depreciation is a good option to along with the standard car insurance plan. By paying a slightly increased premium you can ensure that...

  • Q

    I am 20 years old,I am getting 17+ % or returns from share in my portfolio consistently for the last 6 months.should i think about a career in stockbroking?

    A

    Its nice to note that your portfolio has been gaining such high returns, however it might be too early to take a call and make stockbroking ...

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.