Real Estate Property Investment as Tool to Counter Inflation & Wealth Protection
[Last Updated: 18th March 2019]
Why has it become traditional wisdom to just invest savings in Real Estate ?
Property as a vehicle for investing your hard earned money is considered the best one for the any class of investor and even the most professionally advanced ones. The room to make error is little. The simplicity of evaluating growth prospects for real estate can be easily learnt without much complexity.
The reason is Simplicity and Tangibility of the investment. It is real and can be touched and felt.
Grow at 16-18*% p.a. annual returns on Capital with vesting period of atleast 10 years in high growth Indian Realty Projects
The only caveat is any investor who really fancies handsome return on investment the figures like 16-18% p.a. growth of capital should ideally invest and sit back for 10 good years. Yes you read it right evaluate in terms of decades. with today’s google era this number looks too far and becomes a pain for the impatient investor. This leads them to look for alternative investments / schemes /financial products which eventually give lower annualised returns or become so risky that the wipe out the capital itself.
Why do I write Real Estate as a Counter Tool to Inflation? What does it mean to protect your wealth? [and how does it link to your retirement and wealth planning]
Fact1: With medical advancement, life expectancy has increased on an average for middle class to minimum 80 years. You are going to retire at the age of 60 years and with your medical bills your expenditures will increase and with small pension(if any, depends on your case) and no income you will look towards your savings.
Fact2: Do you know Inflation in India ranging from 6-12% makes your savings much smaller than you think? I mean even though you have money saved in your bank account, inflation makes your purchasing power smaller every year. E.g. It took average 1.2 Lakh Rupees Fees to Study in IIM-Ahmedabad in 1990s but today after 30 years it takes around 30 Lakh Rupees. Even if by 1990s standards that is 30 years back if you could save 1.2 lakhs for a project that you wanted to pursue it would cost you actually 30 times more. This is what inflation does at 6% every year to the figure 1.2 lakhs. It reduces your purchasing power.
Conclusion: You need a counter inflation tool i.e Financial Investments that grow at a faster pace than 6-12% annualised returns i.e something like 15-18% annualised returns which hedges you against this killer that makes your hard earned savings look stupid and incapable after 2-3 decades. Real Estate over last 7-8 decades year after year has proven to be not only counter inflationary but also grower of wealth and generally if invested with the right advice (yes this is an important key) can really compete for 15-18% return on capital. This has been the good news and shall remain.
Now savings if not correctly invested and protected against inflation will fall short of your actual requirement of finances in the age bracket of 60 to 80 years for both you and your wife. This is when you as parents really look towards children and expect them to help you with finances.
One very important outlook in this advice is there may be other risky financial instruments with an equal footing of return on investment or may be higher(if evaluated for shorter periods than 10 years i.e a decade) but if you start averaging the other lucrative financial instrument over 10 years horizon and compare it with real estate nothing beats it’s simplicity and tangibility.
I understand!!! Now, how to identify high growing Real Estate Projects / Micro Markets. Some Imp. Questions
- Do commercial shops give better ROIs-Return on Investment than residential.?
- How is capital gains tax different for Commercial and Residential property and how does it affect my ROIs?
- City Vs Outskirts how to evaluate the growth prospects and how does it affect my ROIs?
- One Big Capital Property investment Vs Many Small Property Investments? Does Diversification help?
To discuss these questions give us a call. We would be happy to prescribe an investment advice looking into your financial position. We would be happy to discuss this over a cup of coffee.
- Retirement funds required in India run into crores
- Most Indians are unaware of their retirement fund numbers
- To calculate funds, go to Google and type Retirement Calculator lndia. If you are too lazy to calculate it, you can assume it to be Rs 4 crores.
- High requirement is due to the absence of health/education security or pension
- With increasing life expectancy the fund requirements also increase
Financial investments with their meagre returns cannot help you reach goals. Real Estate investments can make it really simple and effective.