Investing in property is something that we all want to do. This article explains why a property is a preferred investment option.
Well, the reason most people invest their money is to increase the value of their savings and safeguard them from inflation. As time passes by inflation gradually erodes the value of money. For example, one could buy a car for Rs 5000 in 1965 but today it cost a Rs 4,00,000 to buy a similar car.
That’s a price increase of 80 times! There are a lot of investment options available for an individual. Real Estate, gold, precious stones, stocks and deposits in the bank are some of them.
Investing in Property
Let us compare gold and property as investment options since gold, stocks, fixed deposits have similar traits while a property is a different type of investment. Gold can be bought in small quantity. Property requires a larger investment. Gold can be liquidated fast. Selling off property requires some time.
Property gives regular returns in form of rent, lease while also appreciating in value. However, in the case of gold, value appreciation can be realized only on liquidation.
Buying gold is a low involvement decision and does not require much research while buying property is a high-involvement decision requiring research. This research could be carried out by the investor personally or by using the services of a real estate expert.
Investing in property makes the investor eligible for structured tax benefits while selling gold attracts capital gains tax. Investing in property is also a booster for the country’s economy as it involves developing land for better use. Gold investment is essentially a hedge(inflation safeguard) and has no such benefits for country’s economy.
Which type of Property to invest in?
Types of Property
The type of property which is directly related to business activity is known as commercial property. Retail, wholesale shops, office space, and buildings are some examples of commercial property.
Investing in commercial property generally gives higher returns on investment as compared to other property types. An example of a commercial project is this.
As the name suggests, residential property is that property which is used as housing and shelter. Investing in residential property provides steady returns over time in form of rent or savings when it is used personally for housing apart from value appreciation. Here is a good residential project for mid to long-term investment.
Land used for farming and related activity comes under the agricultural property. Agricultural property provides a steady income through rent, lease and farming income. It also has huge tax benefits as agricultural income is exempt from tax.
There is also good scope for value appreciation. In areas notified under city master plan agricultural land gets acquired by the authority at up to four times the prevailing market rates.
Property used for industrial activities comes under this head. Industrial shed, godown, factories are examples of such properties. Environmental clearances, pollution control, and such aspects are unique to this type of property. Returns are directly related to the industrial growth in the region and can provide you with steady returns over a longer period of time.
So we see that investing in property is usually a mid to long-term investment option that is safe. It is also a source of high returns when compared to other forms of investment. It is advisable for most investors to have at least 70% of investment in immovable assets like property. A maximum of 25% can be held in liquid assets like gold and cash deposits.
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