Bricks and mortar versus paper gains - why owning a home wins

As Indian market soars, investors grapple with choices. Which is the smarter move- stocks, gold or a surprising winner? Residential real estate emerges as the hidden gem

In the wake of the Indian stock market's record-breaking highs, many investors find themselves in a quandary. Should they continue investing in stocks, chase the ever-fluctuating gold market, or explore a different path altogether? While both assets have the potential for reward, there's one asset class that consistently outperforms them in both value appreciation and overall satisfaction: residential real estate.

Real Estate: A Consistent and Reliable Performer

Consider these compelling statistics:

• The national average residential property price increased by over 8% year-on-year in the first half of 2023, according to leading property consultancies.

• Average rental yields across major Indian cities ranged between 2.5% and 4.5% in 2023, providing a steady stream of passive income.

• Property prices in key metropolitan areas like Mumbai, Bangalore, and Delhi have grown by an average of 15% annually over the past five years.

• These figures paint a clear picture: residential real estate offers consistent appreciation, making it a reliable long-term investment.

Beyond Financial Returns: The Unquantifiable Value of Owning a Home

The true value of real estate extends far beyond financial benefits. Owning a home provides a fundamental human need: a secure and comfortable haven. This alone carries immense value, offering stability, peace of mind, and a sense of belonging that no stock or gold investment can replicate.

Land: A Scarce Resource with Increasing Value

Unlike stocks, which can be readily replicated and traded, land is a finite resource. As India's population continues its rapid growth, the demand for housing shows no signs of abating. This translates to an ever-increasing scarcity of land, particularly in desirable locations. By investing in real estate, you're not just buying a home; you're securing a piece of land that will only become more valuable with time.

The Psychological and Social Benefits of Homeownership

Owning a home goes beyond dollars and cents. It fosters a sense of belonging, community, and pride. It provides a space for families to grow and thrive, creating memories that will last a lifetime. Studies have shown a positive correlation between homeownership and mental wellbeing, overall life satisfaction, and even stronger family bonds.

A Treasured Legacy for Generations to Come

Real estate offers a tangible, long-term investment that can be passed down to future generations. By investing in a home, you're not just building wealth for yourself, but for your family's future as well. This creates a generational legacy that ensures long-term financial security and stability for loved ones.

Financial Stability Through Rental Income

Owning a second home or renting out a portion of your property can be a reliable source of passive income. This additional income stream can contribute to financial stability, retirement planning, and achieving other financial goals, ultimately giving you greater control over your financial future.

Tax Benefits and Portfolio Diversification

Investing in residential real estate offers various tax benefits, including deductions on home loan interest and capital gains tax exemptions under certain conditions. This further enhances the financial attractiveness of owning a home. Additionally, real estate provides diversification benefits for your portfolio, protecting you from the volatility of the stock and gold markets, thereby creating a more balanced and resilient investment strategy.

A Home is More Than an Investment

While stocks and gold may offer the allure of short-term gains, they also come with the risk of sharp dips and worrisome highs. In contrast, real estate remains a cornerstone for long-term wealth creation and overall well-being. With its consistent appreciation, increasing land value, social and psychological benefits, and long-term value proposition, a home offers much more than just financial returns.

It is the only investment that delivers multiple and sustained returns and should definitely feature large in a diversified investment portfolio. And - it's a place to call your own, a sanctuary for your family, and a legacy to be cherished for generations to come. As the Indian economy continues its growth trajectory and urbanization progresses, investing in real estate remains a wise and rewarding decision for those seeking a secure and fulfilling future.

(The author is is Managing Director - Pharande Spaces, a leading real estate construction and development firm famous for its township projects in West Pune and beyond. Pharande Promoters & Builders, the flagship company of Pharande Spaces and an ISO 9001-2000 certified company, is a pioneer of townships in West Pune)