Investment in real estate is considered to be both financially beneficial and also a Status issue. Buying a property will be the top most priority for most of the young Indians once they land a good job. A lot of savings goes into it and properties are always bought with a home loan from banks or financial institutions. This article will talk about all possible benefits of investing in Real Estate.
1. Safe Capital Appreciation
Real Estate is one of the rarest asset qualities which will always grow. The cost of your property will not go down easily. When there is a slow down the increase in pricing will be low or the price will be same. The probability of price coming down below 10% is highly unlikely. History shows that Real Estate goes through ups and down cycles. When it goes up, the price increases by 30-40% and when it goes down, it will only go down by 5-10% maximum. Thus it is a safe and also appreciating investment.
2. Monthly Income
Capital appreciation is a long-term benefit of investing in real estate, the immediate and ongoing benefit is the rental income that your property will fetch. In general properties in Indian cities tend to generate an annual return of 4-5% in rent. Though this amount is smaller than 8% provided by fixed deposits, you should also count the capital appreciation a property generates. Fixed deposits are safe and secure but no capital appreciation apart from 8% fixed interest.
3. Tax Benefits
When you buy a property using a bank loan you get 2 types of tax benefits. Loan principal repayment under 80C, the maximum deduction allowed is Rs. 1 Lakhs. The next part of tax benefits is the interest part you pay in the EMIs. The maximum allowed under interest repayment is Rs. 1.5 Lakhs per annum. Thus you can easily save Rs.2.5Lakhs in taxes if you invest in real estate.
4. Tackle Inflation
Most people in India fail to understand the biggest disadvantage of Fixed Deposits. Fixed Deposits fail miserably when it comes to fighting inflation. When you invest Rs. 30 Lakhs in Fixed deposit, you get around Rs.2.4 Lakhs as the annum income for the first year and second year and all the following years. Inflation will not be steady each year, it grows with each passing year. At end of 5 years, you will still be earning the same interest rate whereas the price of resources would have gone up. This is where rental income is good. When you invest Rs.30 Lakhs in a property you might get Rs. 1.2 Lakh as rental income for the first year followed by Rs.1.4 Lakhs for the second year. Rental yield will increase by 10-20% each year which will help you fight inflation.
5. Financial Control
Your real estate investment acts as a backup source for you. You have the complete control to liquidate the property as and when you have an emergency. This gives you financial freedom. For some emergency health reasons, you might require a huge sum of money, instead of looking for lenders you can cash in on your property. You can do this by either selling the property or pledging the property and getting a mortgage loan.
Apart from the monetary benefits you also get a social update in your community when you own a property. People will start respecting you better when you are a property owner.