Real Estate vs Gold: Making Informed Investment Decisions in India

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January 30, 2024

Investing in assets like mutual funds, fixed deposits, gold, real estate, stocks, or others is essential to generate additional income and meet your future financial goals. Rising inflation rates lead to a surge in the prices of goods and services over time, decreasing your money's worth and reducing your purchasing power. Investments are beneficial since they help grow your money and increase its value periodically, which is crucial to beat inflation. The returns you derive will likely be higher the longer you keep investing.

You can allocate your savings to multiple short-term and long-term investments in India. However, different investment options come with varying risk levels and potential for returns. Hence, you must gather as much information as possible about the available investment opportunities before choosing the ones best suited to your requirements.

Introduction

Studying factors like the return potential, lock-in period, risk level, investment flexibility, etc., can assist individuals in making informed investment decisions. If you invest in an asset without gauging these vital aspects, you may incur unforeseen risks and hefty losses that you could have avoided otherwise.

Of the numerous investment options in India, real estate and gold are timeless ones with massive demand. While real estate investments are reliable for the long term, gold carries a significant auspicious and emotional value in Indian households. Therefore, a dual dilemma that many Indians have faced for decades is to choose what's better: real estate or gold.

The best thing about gold investments is that they can be flexible according to your spending capacity or investment appetite. Although real estate investments involve a substantial amount of money, at the same time, they can help generate a regular income flow, provide tax advantages, and help diversify your portfolio with less risk.

Through this blog, K. Raheja Realty aims to compare real estate and gold as investment vehicles with a detailed explanation of their advantages and challenges. As one of the top developers in the nation, we have profound expertise in facilitating successful property investments since our inception in 1956. Read on to discover more and become a well-informed investor.

Understanding Real Estate as an Investment

Real estate is a secure investment avenue with numerous long-term benefits. Depending on your investment purpose, you can invest in residential or commercial properties to earn a monthly rental income or resell it for profit after its value appreciates.

Long-Term Appreciation and Stability

Strategic real estate investments can yield great returns since this immovable asset has a vast appreciation potential, and property values almost always increase over the years. Real estate prices are not volatile and do not fluctuate constantly, making it a secure choice for your future.

Historical Trends in Real Estate Value

According to a study released in October 2023 by the Centre for Social and Economic Progress (CSEP), housing prices in India have witnessed an annual growth rate of 9.3% from 1991 to 2021. This implies that property prices have risen by around 15 times over the past three decades. Yet, the rise in prices varies at the regional level, with some cities witnessing higher growth rates than others due to their overall favourability and high demand.

For example, a report by JLL India states there has been an approximate 10% rise in Mumbai property prices per year over the past 20 years. In contrast, Bengaluru and Kolkata have grown modestly at around 5% per year in the same period. The local economic conditions of a real estate market, the demand-supply dynamics, urbanization, and infrastructure development are some critical factors that influence the variation in regional property price growth rates. On a broader level, government policies, the national economy's status, and global events also impact the country's housing market.

Stability Amid Economic Changes

Despite global economic uncertainties and a challenging market landscape, the Indian real estate industry has shown tremendous resilience and is all set for a promising 2024. Knight Frank India's Real Estate Report 2023 depicts an 8-10% rise in residential property sales and an estimated 5-7% rise in average prices across prominent cities. Real estate is undoubtedly a profitable investment, given the strong demand for housing, favourable demographics, conducive government policies, and a growing economy helping it flourish.

Tangible Asset with Utility

Real estate is a sturdy and tangible physical asset you can utilise for different purposes. If it is a residential property, you can reside in it or rent it. If it is a commercial space, you can use it to conduct your business or lease it out to another. This feature lends a unique intrinsic value to real estate, making it an even more alluring investment option.

Dual Benefits of Ownership and Utility

Investing in real estate means experiencing the dual benefits of owning the asset and utilising it while it appreciates with time. It plays a pivotal part in your daily lifestyle and influences your well-being, providing emotional comfort and financial security.

Real Estate as a Secondary Income Source from Investment

Real estate is an excellent platform for secondary income generation through investment. You can earn stable monthly returns through rental income by renting or leasing your property to tenants. Thus, real estate investments can regularly supply these extra earnings in addition to periodic appreciation and expand your finances.

Analysing Gold as an Investment

Gold is a flexible investment asset with a stable growth rate and high liquidity. However, it is important to understand gold's inverse relationship with the US dollar before investing in this instrument. Since the USD is the benchmark pricing mechanism for denominating gold internationally, an increase in the dollar's value causes global gold prices to plunge, and vice versa. The rising dollar decreases the value of other currencies, thereby reducing the demand for imported commodities like gold, which in turn can depreciate gold prices in India and other countries.

Historical Value and Cultural Significance

Over and above its financial significance, gold has deep roots in Indian history and culture. While the charm of this exquisite metal has yet to escape other parts of the world, most of its sales still occur in India. Gold symbolises auspiciousness, so people flaunt it with pride during festivals, weddings, and other special occasions. It is also an important family heirloom in many homes.

Gold as a Traditional Investment

Traditionally, gold is a highly preferred investment option in India. Most people celebrate auspicious events with the purchase of gold and love to flaunt it as a social status symbol. As opposed to cash or paper currency, gold has retained its value over the years and is a common form of inherited wealth.

Fluctuations in Gold Prices Over Time

Gold prices in India change nearly daily and are much less predictable than real estate. These frequent fluctuations are owing to the demand-supply equation, geopolitical tensions, and the rupee's value against the dollar, among other factors. However, as per historical price trends, the value of gold has usually been on an upward trajectory, barring the depreciation observed in some years.

Liquidity and Limited Utility

Gold being a highly liquid asset, you can easily purchase and sell it anywhere without paperwork or documentation. Conversely, gold's portability also puts it at risk of loss or theft, in which case you may lose your invested money. It also has limited utility since investors use the purchased gold sparingly, only during significant events.

Challenges in Monetising Gold

India is among the major gold markets worldwide, with a large portion of this gold held in Indian homes as a safe-haven investment and a hedge against inflation. The findings from the India Gold Policy Centre's (IGPC) recent study reveal that families in India hold around 30,000 tons of gold. 87% of households, including those with the lowest income levels, own at least some gold. However, many seem hesitant to monetise it due to the historical and cultural value attached to this precious metal. Despite the government's initiative to mobilise gold and enhance its productive use through the Gold Monetisation Scheme (GMS) launched in 2015, the program still needs more significant efforts to successfully incentivise families to part with their privately held physical gold. The program's insubstantial progress is evident since only 21 tons (0.22%) of surplus gold from Indian households has undergone monetisation since the scheme's inception until 2023.

Lack of Additional Income Streams

Even though gold prices increase over the long term, providing investors with returns through capital appreciation, it does not generate dividends or a regular income. As a result, gold investments are better for accumulating long-term wealth and capital preservation. But because of the inverse relationship of gold prices with the US dollar, gold investors in India may derive lesser returns in the short-term due to the depreciation observed when the dollar's value is on the rise against the rupee.

K. Raheja Realty's Perspective

Both real estate and gold investments have advantages, but the former has demonstrated endurance even in uncertain global economic conditions. Besides, it is a non-portable asset with utility that investors need not fear about being lost or stolen. K. Raheja Realty believes real estate is a more stable and reliable avenue than most for long-term wealth-building. It is seen as a hedge against inflation, offering financial security when the purchase value of your money drops over a period of time due to the rising inflation rate. Real estate investments are therefore the best solution for investors seeking a safe investment option to protect their hard-earned finances.

Real Estate: A Solid Investment Choice

K. Raheja Realty is a pioneering multi-dimensional real estate company in India with a supreme legacy of over 67 years, specialising in various asset classes like residential, commercial, retail, and hospitality. From our very first project to our latest ones, we have delivered sheer excellence in planning, scale, and form to give our customers the gift of an exceptional lifestyle that exceeds all expectations. We have successfully developed 2,000+ projects covering more than 20 million square feet across cities like Mumbai, Pune, Bengaluru, Chennai, and Coimbatore.

Our impeccable luxury spaces boast high-quality engineering, architecture, design, and world-class facilities and feature strategic placements in prime locations with sound infrastructure and unparalleled connectivity. These positive aspects have ensured that all our clients' investments bear the fruits of profits for years. Our prestigious clientele, who have partaken in such successful investments with us, comprises individual buyers, highly respected professionals, national & multinational business conglomerates, professional organisations, and government agencies across domestic and international markets.

Furthermore, K. Raheja Realty has many feathers on its cap, including several accolades and awards that have given us immense recognition for the work we passionately do. From winning the 'Best Quality Assurance Award' and the 'Best Residential Project of the Year' Award (Raheja Residency) at the Global Sustainability Leadership Awards, 2021 to bagging the nation's Most Influential Real Estate Brand award at the India International Influencer Awards 2022, our list of achievements is testament to our sterling record in the industry.

Client Success Stories: Realising Dreams with K. Raheja Realty

At K. Raheja Realty, every project intends to fulfil our customers' deepest desires and highest aspirations. We have accomplished numerous successful real estate deals to date. Read further to see what one of our customers has to share about his investment experience with us

Akshay Sharma, a resident of Raheja Residency in Malad East, says he and his family initially moved from Delhi to Mumbai. After more than a year in the financial capital, they decided to buy property here and put down fresh roots. When looking for homes in Mumbai, his primary criterion was a spacious apartment with balconies and open spaces. In addition, he was also searching for a property with a swimming pool and clubhouse since his son has a great interest in swimming. Raheja Residency fit the bill seamlessly on all these criteria, so Akshay is thankful to K. Raheja Realty for helping him find the perfect home for him and his family.

As illustrated by the above example, K. Raheja Realty's aim has always been to enable our clients to invest in their dream homes, become financially secure, and create a better future for themselves and their families by building wealth through lucrative real estate investments.

Tailored Real Estate Solutions for Different Investment Goals

Every homebuyer has a distinct motive behind investing in real estate. For instance, someone may buy a house to reside in, whereas another person may invest to earn regular returns through passive rental income. Some may purchase property to save for retirement, while others may do so for portfolio diversification. Whatever your investment goals, the qualified experts at K. Raheja Realty provide tailored real estate solutions to satisfy all your requirements. Reach out to our team for information about how we can help.

Comparative Analysis

Based on different parameters, there are some critical differences between real estate and gold. In real estate investments, you pay a lump sum as a down payment, and it also involves debt financing since the transaction is huge. On the other hand, the amount you invest in gold depends entirely on your investment appetite. Real estate is less liquid than gold, but it is not volatile like the latter, either. The most crucial difference, however, is in the potential ROI you derive from the two avenues.

Returns on Investment: Real Estate vs. Gold

In addition to long-term appreciation, real estate investments can generate a regular monthly income through rentals, which does not apply in case of gold investments. Returns from gold are nominal, whereas those from real estate are substantial enough to include property investments in your overall wealth-building strategy. For example, if a gold investor received x% returns during 2022-23, a real estate investor who invested an equivalent amount of money to buy a residential property during the same period would have earned roughly around (x+6)% ROI in that one year. Although both are profitable investment options, real estate can generate greater returns due to its utility feature and ability to generate secondary income through rentals.

Risk Mitigation and Long-Term Stability

Real estate investments are safe compared to most other investments but have few inherent risks. Changes in interest rates and lending policies or hurdles in securing home loans can pose financing risks. You face liquidity risk when you cannot sell your property as quickly as you would like when you urgently need cash. In some cases, the property you have invested in may have legal, environmental, or physical issues, exposing you to property-specific risks. Therefore, it is essential to mitigate these potential risks through diversification to attain long-term stability.

K. Raheja Realty's Approach to Balancing Risk and Reward

To reap maximum rewards from your property investment with minimal risk, K. Raheja Realty recommends the following risk mitigation measures:

➢ Diversify the properties you invest in. Choose a mix of residential, commercial, and retail properties to spread risk and minimise exposure to market changes impacting a particular sector.

➢ Invest in ready-to-move properties. Since you will obtain immediate possession of the property on buying, you can rent it to a tenant and promptly start earning monthly returns through the rentals.

➢ Consider factors like location, amenities, and the neighbourhood before investing. Choosing a property in a prime location will provide several benefits due to the excellent infrastructure, connectivity, and transportation network. A property with thoughtfully crafted amenities can enhance the lifestyle of residents significantly, promoting their all-round wellness. The presence of a culturally-rich and progressive community of residents should be another encouraging sign for prospective investors.

Technology's Role in Real Estate Investments

Over the past few years, the real estate sector has integrated various innovative technologies such as Virtual Reality, Artificial Intelligence, Augmented Reality, etc. Therefore, you can avail many cutting-edge technological tools to aid your decision-making process in real estate investments. These tools provide helpful information to help prospective buyers choose which properties to visit and invest in.

For example, virtual property tours let you see a 360-degree view of sample homes and animated walkthroughs of the entire property with amenities. In addition, many real estate developers have started extending online consultation services to provide a convenient experience to clients. Such online resources help customers learn more about a property and gauge whether it aligns with their expectations before visiting it for further inspection and questions.

K. Raheja Realty presents a technological edge in real estate transactions in multiple ways. Since the past five years, our company has been offering virtual site visits which have proven to be extremely useful, especially for our international clients. We schedule these online appointments according to their specific time zones for their convenience. The efficient executives at K. Raheja Realty are just an online call away whenever you require their guidance or support.

Our brand boasts a strong online presence, which has helped us stay at the forefront of the industry in this age of technology. We keep ourselves abreast of all the latest technological trends relevant to the real estate sector and adopt them to cater to the ever-changing needs of our customers more efficiently.

Sustainable Investments with K. Raheja Realty

Due to the rising global warming levels, contemporary real estate investors have become more discerning in selecting properties to invest in, prioritising eco-friendly developments over others. Given this soaring demand for green real estate, sustainable investments are moulding the industry's future. Sustainable real estate investments also offer numerous economic benefits in addition to environmental protection, making them highly profitable. K. Raheja Realty has been actively adopting green initiatives for years and has many environmentally friendly developments to its credit. Therefore, we have emerged as one of the top destinations for eco-conscious buyers looking for lucrative property investment opportunities.

Eco-Friendly Developments and Green Initiatives

From incorporating eco-friendly construction materials and energy-efficient designs in our developments to harnessing renewable energy sources, at K. Raheja Realty, we are always looking for new ways of integrating sustainability into all our operational aspects.

Wastewater management and rainwater harvesting are two of our most prominent green initiatives, which help minimise energy costs while improving the quality of life for our resident community. While we use cutting-edge Sewage Treatment Plant (STP) technology to recycle wastewater in our buildings for non-potable purposes, we leverage rainwater harvesting to lower our reliance on municipal water supply. These measures reduce our overall carbon footprint and provide significant cost savings to investors.

Long-Term Benefits of Sustainable Real Estate Investments

Sustainable real estate investments promote environmental preservation and enable the creation of a healthier future for the generations to come. Eco-friendly properties consume less energy and incur low maintenance expenses, lowering operating costs. The surge in demand for green real estate coupled with favourable government incentives can further improve the financial viability of such investments. As a reputable and trusted developer in India, K. Raheja Realty is deeply committed to sustainability and adopting environmentally responsible building practices. We have also won a few esteemed awards that acknowledge our eminence in this vital sphere.

Conclusion

In this blog, we compared the lucrativeness of real estate and gold investments, their advantages and risks, potential for returns, and more. Real estate is a stable, long-term investment avenue with utility benefits that can produce a regular monthly income supply for additional wealth creation. It is resilient in the face of market fluctuations and economic uncertainties and can appreciate considerably in the long run. Talk to K. Raheja Realty's experts, who can guide you in making informed decisions with their in-depth insights on real estate investments. Contact us to book a consultation right away!