Opinion: Why Real Estate Is Still The Safest And Reliable Investment In India

The economy is looking robust with high investments across businesses in recent times. A recovery in property prices and rise in yields has made investment in residential properties attractive yet again and has been responsible for continued demand in the sector.

According to a recent report, the second quarter across India's top seven cities, witnessed 36% increase in sales compared to last year. The long-term benefits of owning a home have led to sustainable growth in the segment.

An increase in earning potential, a need for a better standard of living and the growing base of aspirational consumers and their lifestyle changes has led to substantial demand and growth in the sector.

Unsplash/Representational image

With economic growth, the premium housing segment too will continue to witness higher demand in the future. While all these factors have made real estate a desirable asset class, there are several other factors too that are important.

Security and Safety

Homeownership as a long-term investment strategy is now more appealing than ever. Investment in residential real estate is going up steadily as safety and security is a primary concern among home buyers in the post-pandemic era.

The health crisis gripped people across the country as a result of which owning homes became a top priority. People realized that they should have an asset that is good not only as an investment, but a secure option to navigate uncertainty too. Hence, the positive demand for residential real estate.

A stable and reliable investment opportunity

Unsplash/Representational image

Regardless of economic downturns, real estate has always been a stable and reliable investment option, with rental properties proving to be a profitable asset class for investors. While many other asset classes are available for investment, real estate investment remains one of the most preferred options given its durability compared to the others. The volatility of other assets does not match the stability of real estate investments as it offers greater security as well as be an income source for the long run.

A rapidly growing sector

The Indian real estate market is growing at a fast pace. The market for real estate is expected to grow to Rs. 65,000 crores in 2040 and would contribute almost 13% of the country¡¯s GDP by 2025. Both large and small investors in India are realizing the benefits of investing in real estate especially in an atmosphere of cautious investment. Additionally, a large chunk of the young workforce is now investing in real estate for overall well-being and future security.

Diversification of assets

Diversification potential is a major benefit of real estate investment which holds more value than traditional asset classes. With it, you can create a diversified portfolio and have real estate assets in various forms - residential, industrial, and commercial. Also, you can do it by geography or strategies. Real estate also lowers portfolio volatility while ensuring a higher return per unit of risk.

Provides tax benefits

Unsplash/Representational image

There are several tax benefits for real estate investment. For example, under section 80C, if you take a home loan, you can save up to INR 1.5 lakh on the principal amount. Also, you can save up to 2 lakhs on the payable interest, as per section 24. Overall, it helps you reduce a high amount of your taxable income through real estate investments.

NRIs look at real estate as a durable product

The NRI gaze on the property market in India intensified in the post-pandemic era. NRI¡¯s realized that in a context like the pandemic, it would not be rational to hold on to equity or gold alone, but an immovable asset that would help them during visits to their home country and as an investment during crisis. With global polices being uncertain, guaranteed assets like real estate lend a feeling of permanency and hence preference for real estate is high.

India¡¯s real estate market is one of the most dynamic and fastest-growing in the world. Real estate investments hence remain one of the most desired investments due to their strong base and reliability factor. We will continue to see a multi-fold growth in real estate investments since the real estate market is less volatile than other investment markets and delivers higher returns. As long as the macro fundamentals are stable, demand for real estate will continue to grow. The Indian real estate market is booming and being a part of its growth can extend favourable returns in the future.

About the author: Ramani Sastri is the Chairman and MD of Sterling Developers. All views/opinions expressed in the article are of the author.