Housing Realty – an asset or a hamper?

The early 2000s is considered as the golden era for the real estates. Since the second decade, the residential property has not been able to match the returns as compared to that of the golden era. This has left the stakeholders – property owners, investors, financial planners and buyers in a dilemma as to search for a better alternative for their investments.

The early 2000s was considered as a high-profit yielding investment in residential property. The property price appreciation in 2013-18 bottomed out at 12 percent which made it a little over 2 percent a year even for the property at prime locations. In 2004-08 the average housing return across the top 7 cities in India was over 60 percent. Making a drop of more than 40 percent in the years 2013-18.

As an alternative to the investment in real estate, it would be captivating to see if stocks or mutual funds could supersede real estate in the long run. According to ANAROCK’s recent survey, it indicates that only 25% of the people went with investments in stocks and mutual funds and a majority of 57% people still opt for ploughing their investment into real estate. Very few casted their lot for investment in fixed deposits and gold.

From ANAROCK’s data, it is clear that Indians indelible love for investment in properties has not collapsed. Although the return on investment has relatively declined but it is more stable and safer than the other options available for long term investment. People have started finding other alternatives in residential space itself. The government is subsiding affordable housing schemes and it could also give 8-10 percent in the long term. Some other residential investment alternatives include a serviced apartment, Smart City-based housing, senior living, and co-living.

Short term investment in the housing sector today makes no sense. Investors are advised to at least have a horizon of at least 5-7 years. In the meantime, investors can earn income in the form of rent as an assent that has undying inherent demand.

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