Real Estate As Investment
“Buy Land, they are not making it anymore !”- Mark Twain.
The objective of investment is to protect one’s savings from inflation and increase the fund of capital at one’s disposal. Thus a sound investment policy looks for assets that are inflation proof and growing in value due to fundamental factors. Investment is often confused with speculation where people allocate their hard earned savings to volatile capital markets in the fervent hope of getting rich quickly. Such a strategy, like all get rich quick schemes, often ends in disaster leading to a loss of capital as well as confidence. On the other end of the spectrum, some people allocate all their savings to bank fixed deposit schemes that offer a return lower than inflation thereby ensuring that their hard earned savings lose significant purchasing power over time. While the stock market can offer sound investment opportunities to beat inflation and grow capital, it requires gritty research and emotional equanimity, both of which are difficult traits to acquire. Those not possessing these traits usually lose their savings to market upheavals. Investing in gold either directly or through the purchase of ornaments is an exercise in speculating on the gold price which is not driven by fundamental factors of demand and supply but sentiment. This makes the price of gold extremely volatile, causing significant anxiety to a risk averse investor.
Real estate on the other hand does not suffer from any of the above shortcomings. It provides the best hedge against inflation and offers a steady growth in capital due to the fundamental shortage of developed land in India. It may carry liquidity risk but that can be mitigated by smart selection of locations. it is not volatile like stocks and gold and also offers steady rental income unlike gold. Real estate investment can also be safely leveraged through loans and thus does not entail lump sum outflow of cash. The attractiveness of investing in real estate is enhanced by the fact that real estate demand in Kolkata is driven by end users making it the most stable real estate market in the country. Real estate prices in south and central Kolkata, where the bulk of our projects are located have grown from an average price of Rs. 4000 per sq ft in 2009 to Rs. 9000 per sq ft in 2015 leading to a gain of over 225% in 6 years.(Source: magicbricks.com) Moreover, there are many tax benefits associated with investment in real estate. Along with indexation, a flat 10 % depreciation benefit is available to individuals on commercial rental properties and 5% on residential properties. Home buyers get tax rebate of up to Rs. 2 lakhs on interest paid on housing loans and Rs. 1.5 lakhs on principal repayment under section 80C. Thus, real estate is one of the most attractive and potentially risk free investment options available today.
At Arrjavv our objective is to help you participate in this opportunity to make sound investment gains in the real estate sector through our ability to select the best locations and develop them in to attractive properties, in our customary transparent and honest style. Please feel free to reach out to us if you need any more information.
We wish you a profitable future.