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Gold vs Real Estate: What Is The Smarter Choice Today?
Updated : August 31, 2023
Author :
Table of Contents
Overview of Gold vs Real Estate
For Indian families, the age-old predicament has always been: Which comes first? Property or gold? Real estate investing shouldn't be avoided just because it may be a new investment strategy. Real estate investing can be a financially viable and secure way to make significant returns on your money if done properly. While adding exceptional benefits to your portfolios, such as tax advantages, diversification, and a less risky asset option, it can generate a consistent income flow. For Indians, purchasing something valuable during a joyous occasion comes naturally, and gold has traditionally been the top option for buyers. Today's investment-savvy Indians are questioning conventional wisdom and choosing assets that are more in line with their short- and long-term financial objectives. Indians are renowned for having strong feelings and attachments to certain things. Family or the idea of family is undoubtedly one of them and has sustained us. The other is real estate or gold. In India, purchasing a home is more than just a pragmatic decision. It's a sentimental and emotional choice, and these feelings will likely only intensify with time. But it's only their main residence. Even talking about buying a second home or investing in real estate arouses feelings in India. At the same time, we Indians have a strong attachment to gold. For a variety of reasons, including the desire to leave a legacy for future generations, we are compelled to invest in gold.
The crucial question is now: Which is the best option for investors? Gold or property investment in India? Both are unquestionably the best investment choices for the majority of people. Real estate has always been perceived as an asset-building strategy and has long been linked to feelings of security and comfort for the future. Over the years, a number of investors have also viewed gold as a source of security or comfort. Without further ado, let's compare gold vs real estate investments in India.
5 Reasons To Invest in The Indian Real Estate Ecosystem
Wondering why invest in real estate? Here are the top 5 benefits of investing in real estate in India:
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1. Low volatility:
Compared to gold, real estate is a more reliable investment option. Additionally, having a home means that your future is secure.
2. The costs provide value:
Through improvements and repairs, the property's value can be raised. The house can be changed as you see fit, unlike gold.
3. Renting it out:
You can always rent out the property to generate a consistent income, even though you are using it yourself. Rental income is a fantastic way to create a positive cash flow. The property may also be mortgaged in exchange for a loan.
4. Real estate's value will always rise over time:
The longer you retain your real estate assets, the more value you are likely to receive.
5. Tax Advantages on Real Estate:
Real estate investments have many tax advantages, including the ability to deduct mortgage interest, operating costs, legal fees, property taxes, and depreciation. If you plan to use the investment in real estate as a rental property, it can also produce better returns over time while you continue to receive a regular income. It is a fantastic investment choice for a variety of factors, including great tax advantages and the ability to use leverage to increase wealth.
Reason To Invest In Gold Assets
People choose to make gold investments over other investment opportunities for a variety of reasons. The benefits of owning gold over other forms of investment are listed below.
1. Retaining value:
Unlike paper money, the value of gold has been held constant over the years. Gold is viewed by people as a means of wealth transmission and maintenance from one generation to the next.
2. Protection Against Inflation:
Gold has proved time and time to be a very effective inflation hedge because its price tends to rise along with an increase in living expenses.
3. Diversification of holdings:
Finding investment opportunities that are not closely connected to each other is the goal of portfolio diversification. Stocks and mutual funds have historically had a negative correlation with gold. Therefore, it ends up being the portfolio's diversification tool.
4. No counterparty risk is present for gold:
With regard to gold, there is no requirement for a written agreement or other legal formality. The contractual obligations can be carried out without the assistance of an intermediary.
5. Portability and liquidity:
Due to their portability and high liquidity, gold investments, in particular gold coins and gold bars, are ideal. Anywhere in the world, you can hold gold and sell it in a matter of minutes.
6. No upkeep and carrying expenses:
In contrast to real estate, gold doesn't require upkeep. To keep it secure until you need it, just lock it. Gold also has a high-value density. Millions of rupees worth of gold can be kept in your residence without incurring a carrying expense.
Comparing Real Estate vs Gold: The Preferred Choice
Let’s compare real estate returns in India with gold returns.
| PARAMETER | REAL ESTATE | GOLD |
| Investment Size | For real estate, the investment amount is enormous. The price of land is increasing exponentially due to the rising demand for finite resources. You must put down a significant sum of money in order to buy a house, which requires debt financing. | Your investment appetite will have a sole bearing on the amount you invest. You can begin purchasing gold for as little as 1 gramme. It is better to invest in gold bullion or coins rather than gold jewellery because the latter is subject to extra making costs. |
| Term Period | For a long-term investment, real estate is ideal. | Gold can be held both temporarily and permanently. Long-term gold investments, however, can offer a higher return on investment. |
| Growth Potential | One of the best ways to generate fixed monthly earnings in the form of cash is through real estate. Rent for a rental property may be collected on a monthly basis, with a portion going toward the mortgage. | Returns vary along with the market. The investment value decreases when the price of gold does. |
| Liquidity of Asset | Compared to gold, real estate provides less liquidity. Your property may need to be sold for a while, possibly even months. The process is drawn out and complicated because it includes documentation and stamp duty when selling the property. | The procedure for buying and selling gold is easy. A very liquid asset, gold can be cashed in at any time and with no procedures. |
| Volatility of Asset | Compared to other investment options like gold, real estate is less volatile. | Compared to real estate, gold is more unpredictable. The price of gold fluctuates almost daily. |
| Transparency in prices of Asset | It's possible that real estate prices are not as transparent as gold prices. Additionally, when dealing with real estate, historical data might not be easily accessible. | The market sees frequent trading of gold. The cost of gold bars and coins is very transparent. |
| Tax benefits on Asset | Real estate has a set of tax advantages. When calculating the tax, depreciation, the mortgage tax deduction, the cost of upkeep and repairs, and the cost of legal assistance are all taken into account. | Capital gains tax is applied to gold. In addition, all profits made from gold deposit certificates are completely tax-free. |
Return On Investment: Gold vs Real Estate
According to historical data, returns on real estate have ranged from 8 to 15 per cent on average. Despite an increase in rentals, India's rental yield is still lower than that of other investment options at 7 to 9 per cent. On the other hand, real estate can generate consistent monthly income, something that a gold asset cannot. Real estate is a desirable long-term investment choice because the value of the property rises over time. Compared to gold, real estate offers higher returns without as much volatility. Additionally, the property's value increases as the market strengthens. It makes sense to introduce real estate into your overall wealth generation plan.
Investment in gold is profitable because it outperforms inflation. The gold investment's returns over time are consistent with the rate of inflation. The downside is that when gold's value increases, it usually happens as a result of a decline in the value of paper money. As a result, returns on gold investments are minimal.
Gold and real estate have both underperformed the prevailing rate of inflation of 6% in terms of real returns, but asset management experts believe that real estate offers more liquidity than gold because it offers both capital value appreciation and rental income in addition to capital gains. As a result, selling off their gold investments is a step towards saving for the down payment on thousands of homeowners' dream homes, especially first-time investors.
Concluding Gold vs Real Estate: What Should You Choose?
The futures of both you and your future generations are better secured through real estate than through any other means. Building an asset that will generate income in the future for the following generation will ensure your family's financial security for many years to come. In addition, you can anticipate significant gains on your investment through the growth of your capital over the course of 10 to 15 years. You can also retain the valuation of your asset as it ages with routine upkeep and remodelling. You will simultaneously receive tax advantages for buying real estate and be able to profit from it by renting it out. In many cases, this will assist you in repaying the EMI while eventually assisting you in recouping your investment. Additionally, rental rates increase annually, increasing your return on investment. It's always a good idea to buy some gold, especially if you think it's lucky.
It cannot, however, be a substitute for real estate. However, one thing to keep in mind is that before making a real estate investment, you ought to do your research and due diligence. You should be ready to shoulder the financial burden over the long term and there must be a straightforward value proposition. It will eventually yield significant rewards. When investing in gold, you don't always need to do as much research as you think. The straightforward rule is to always buy cheap and sell expensive when it comes to the yellow metal!
FAQ's
Ans. With less volatility than gold and better returns, real estate is a very stable form of investment. In addition, real estate investments carry little risk. Your property's value rises as the market gets better. As a commodity, gold carries a higher level of volatility and theft risk.
Ans. Investing in stocks will yield higher returns than investing in gold. Equities can produce long-term returns of between 14 and 16%. Dividends and capital gains are the results of equity investments. One of the safest bets is gold, and even its long-term value shows that it has remained appealing and consistent over time. During recessions, gold's value quickly rebounds. Consequently, it is wise to invest in both gold and stock.
Ans. According to Buffett's 2011 letter to shareholders, "unproductive" assets are those that "will never produce anything, but that are purchased in the buyer's hope that someone else — who also knows that these assets will be forever unproductive — will pay more for them in the future." This definition includes gold.
Ans. A long-term investment that works well is real estate. Gold is a currency that can be held both temporarily and permanently. Long-term gold investments, however, can offer a higher return on investment. One of the best ways to generate fixed monthly earnings in the form of cash is through real estate.
Ans. The number of homes a person can own or for which they can receive a housing loan benefit is not capped by income tax laws. However, A person may claim a limited number of homes as self-occupied under tax laws. You can consider your parents' home as being self-occupied for this reason.
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