By Annabel Dsouza



Real returns for both asset classes are similar, but real estate has the added benefit of security and long-term wealth creation



Buying something of value on a festive occasion comes naturally to Indians, and gold has long been the first choice of festive shoppers. However, many investment-savvy Indians today are questioning traditional practices and opting for assets that are better aligned with their current budget and long-term wealth-building goals.

Consider the business professional Aakriti K who bought his dream home – a spacious 1.5 BHK in a gated community in an outlying suburb – during the festival period in Q4 2021. “Since gold is such an integral part of our culture, I have was attracted to him. So I would invest in gold jewelry whenever possible. Over the years I have had 10 lakh gold assets in the form of jewelry. However, when I lacked the money to make the down payment for my dream house, my parents advised me to sell some of this asset to increase the capital. As I was liquidating to invest in a long-term asset, it felt right. So from experience I can say that gold came to the rescue when I needed it, making both real estate and gold an important part of your portfolio,” she says.

Inflation adjusted

While real returns on gold and real estate have lagged behind the current inflation rate of 6%, asset management experts believe that real estate offers more liquidity in terms of rental yields in addition to capital value appreciation, whereas gold only offers the latter . Therefore, for thousands of homeowners, especially first-time investors, liquidating their gold investments is a stepping stone to the down payment of their dream home.

Mihir Personal Finance Advisor Park clarifies: “This has been the conventional practice among Indian families for years. However, at the current growth rate of around 5.7%, investors are unable to achieve inflation rates consistent with gold ornaments due to meltdown losses. It makes more sense to secure your investments in a successful mutual fund if home ownership is your ultimate goal. Moreover, gold-backed loans are also preferable to high-interest personal loans if you are trying to deal with a last-minute financial crisis while buying a property.

For those who want to go the equity route, Parekh advises, “Although they don’t score high on the auspicious quotient, gold exchange-traded funds (ETFs) are also recommended for those who wish to benefit from real returns on gold as a commodity. . Unlike physical gold like ornaments and coins, ETFs do not need to be stored in bank lockers due to the threat of theft. However, unlike investing in real estate through a home loan, there is no tax advantage to buying gold. In fact, ornaments attract GST in addition to generating fees. »

Sentimental value

With interest rates on mortgages at historically low levels and numerous advantages for first-time buyers such as the preferential stamp duty and the PMAY, the total cost of acquiring a home has fallen considerably over the of recent years.

Madurai chartered accountant based in Kaveri krishnan says, “Today, buying gold during festivals is more for token value than real return. Given the lowest mortgage interest rates, pandemic price corrections in the housing market and many other government measures for homebuyers, real estate has the potential to outperform gold and to provide inflation-adjusted returns over the next few years. Many argue that the cost of maintaining property and taxes diminish long-term wealth gains. But these costs should be viewed as investments that only help to further appreciate the asset. Additionally, real estate investments can be leveraged with affordable bank loans. Therefore, one can buy assets worth three times the equity available for such a case.

For those not yet ready to take the leap into real estate, Krishnan says, “A healthy investment portfolio should contain a mix of debt assets like fixed bank deposits, gold, stocks and gold. ‘immovable. The percentage allocation and additional diversification within each asset class depends on each investor’s risk appetite and financial goals. Therefore, one can take small steps towards his expensive real estate investment by investing in a disciplined way in growth-oriented mutual funds over a period of 5 to 7 years.

Source – Times Property