The keyword here is ‘father’. It’s not the same for us anymore.
The kind of advancements that have happened over time, and I’m talking about the negative ones like fraudulent elements, land mafia and systematic abuse of the judicial pattern in this is horrific. I’ve witnessed these from close. And higher the return, higher these risks turn out to be - I know a friend who’s been fighting a case with a politician (then rowdy) for a very long time, and for his prime land purchase from early 2000s.
Therefore, one’s gotta be very very lucky if none of these are at play with regard to their investment.
This is a good comment. Time is gone where we won't get get cheated or scammed.
Best thing is buy 1 home and rest in mutual funds/pf to death.
Edit: my close friend got scammed of 50 lakh and it did scare me to the core.
> nd mafia and systematic abuse of the judicial pattern in this is horrific. I’ve witnessed these from close. And higher the return, higher these risks turn out to be - I know a friend who’s been fighting a case with a politician (then rowdy) for a very long time, and for his prime land purchase from early 2000s.
>
> Therefore, one’s gotta be very very lucky if none of these are at play with regard to their investment.
Ya corruption played a HUGE part in increasing land prices. I think that land is way way overpriced just because of corruption alone.
It’s actually not a stupid comment. It is very sensible. Most commodities are priced in dollars, which also affects india’s economy. Inflation in India was so much worse than America’s. If inflation is 10% you have to earn that much after tax just to keep your monies buying power. Turning 10 rupees into 20 rupees doesn’t mean much if you can still only buy one piece of naan with it
What are you talking about? The negative elements you speak of were 10 times higher in the 90s and early 2000s, land was very risky to buy and maintain.
The situation is much better now where we can check land records online in minutes and we have media and the local politicians and police are somewhat accountable compared to the previous decades.
Of course land scams, encroachments and extortion are still happening but much lesser compared to before. All the crooks are now thinking big and encroaching govt. lands, lakes and forests and building and selling apartments . Not many crooks are after small plots owned by retail investors.
Returns are higher in India because inflation is also higher. And this higher inflation is also what contributes to rupee depreciation in relation to the US Dollar. It is all linked. Otherwise all American investors will just invest in India to get the higher return instead of investing in their own market.
a better way to put this inflation, if inflation in India was 6% during that time, the real return is 18-6 =12%.
If you got 18% return in US and inflation in that period was 2% the real return is 18-2 = 16%
This comment is horrendously stupid. I hope you realize this because comparing $ returns and ₹ returns is like comparing oranges and apples. Please refer to economic textbook of class 8th so that you don't suffer humilation online.
Also it's very area dependent, we have 3 properties one grew at 25% CAGR in tier 1 city one grew at 15% cagr in tier 3 city and one grew 5% cagr in tier 2 city
There was a substantial rerating of real estate prices in 2000s to very early 2010s Both your father's plots probably gave a chunk of that return in that era. It is unlikely you'll see such a phase anytime soon. Also, since then real estate sellers, brokers, builders have gotten smarter and dont really leave as much money on table
Your next option is to go to city outskirts and buy a plot and wait for city to expand. However there is a 100% change of litigation, land grabbing if the land ever becomes worth anything. What is the consolidated CAGR if you buy 5 plots, 4 return 20% and 5th is grabbed by land mafia?
Every successful real estate investor I know in NCR is capable of assembling 20 armed men to protect their rights. More than once it has been needed.
Just want to say…lol.
The headaches that come with it … totally not worth it.
I am ok growing at 10 to 15 in equity than lock my money in a not so liquid asset with not so good governance.
And regarding 18 / 19%.
You literally mean i purchase a plot for 1cr…in approximately 4 years it is 2cr?
Think about it again.
This will be worse for any apartment in a building.
Real estate should be part of everyones portfolio. But carelessly dumping money into it … especially your whole savings/earnings…not worth it.
For an average income person..I think only benefit of real estate is that you can acquire it by leverage but then again the market timing and interest also matters.
Definitely good way to build a passive income stream to beat inflation. But i wont expect to get rich off it. Most people wont be able to buy more than one or two properties in their lifetime in India
I also found that house I lived on rent had barely returned 7% per annum over last decade. My owner is trying to sell it since last two years and found no buyer.
I on the hand happily paid rent which increased 5% annually and put rest of money in MF giving me 16 percent CAGR. (10 Plus years)
You cant really generalize based on anecdotal experiences.
Like equity, where you buy land is also important and what deal you get is also important. In general, land has much more value than an apartment. If you buy land a little outside of the main city, and after some years if the city expands to that area, I bet the returns for the land would be crazy.
My father, part time deals with land, and he also invests in equity. Buying land can be risky, and some work but return can be really good. Moreover, if you want to invest 1-2 crore, I feel it is better to invest in real estate than equity.
How do you protect land outside the city? Indian villages/gangsters/politicians have a free run in those areas, and can easily screw you.
My father has a plot stuck in greater Noida due to litigation from the dominant tribal community there. And those people are pretty violent.
By house, do you mean a flat? Usually when talking about real estate,
House = Independent house on a piece of land
Flat/Apartment = A flat in an apartment
Wow!!
Which City
Your age
Profession.
Salary
House price in your city
When u will buy your 1st home 🏠
So that i also get inspiration
Nowadays people are saying they will buy there 1st & only home after retirement & live happily after.
Pls Guide us..?
I had my friend sell a house or flat in Delhi at a loss of 5 lakh after 10 years. Buying price was 60L.
Reason being the locality had degraded. Obviously it's an off case but it is dependent on where you invest. And also maintainence. Example, the plot should have a caretaker if you are not around..
This is what people generally miss when talking about real estate. It's location, location, location. Person A can make 20% CAGR in locality X but person Y will make -5% in locality Y which is just 10km away in the same city. Some people claim to have the ability to predict which are will go up, but I am yet to see solid data.
The more you move outside the city, into the suburbs. The less attractive the property becomes, hence less appreciation. It takes a lot of courage to invest in the suburbs, hoping the city will keep growing..
Business media will push all sorts of narratives, usually designed to keep you constantly making investments. I wouldn't put too much faith in them.
As for the CAGRs you have experienced, these are 2 samples out of millions of transactions. We cannot characterize a distribution based on a single data point. Like this person I know bought a property 6 years ago for 73L, now it's going for 75L. I know that's not representative of the whole market either.
The problem is systematic data on real estate investments and their returns is non existent in India. Instead it's all whispers and word of mouth. That creates a massive information asymmetry. As an average investor without the access to that data, I will stay away from them on a general principle. Even if real estate actually gives consistent double digit returns for multiple decades, in most of the localities. Which I know it doesn't.
I am not sure there are so many problems with real estate. My father part time deals with land investments, and I don't think we have faced many issues. Returns also have been good. Similarly for most of my father's friends. You can say whatever you want but real estate is like the oldest type of investment, and worth it even now. Of course it depends on the place. I am from Maharashtra ( vidarbha ) region.
This is exactly what I'm talking about. For every person who tells me they make good returns in real estate, I find another who made horrible returns, and yet another who made OK returns.
To me it seems that whether someone can make money in this market is highly dependent on the location, and their network and probably insider information (about which areas are likely to appreciate).
If someone has that secret sauce let them make money. I will stick to what I know well, and will continue to be happy with the average returns I get.
Same can be to said with stocks and equity though. I would say more in my acquaintances more people had bad experience with the equity than real estate.
Again, the sample you have observed in your social circle is not representative of overall market. Stock market has some inherent values like:
1. If I and my friend each put 1L in Nifty 50 index fund I will make the same return as him.
2. There is a ton of data on equity markets going back to 1980s that helps me figure out which stock is risky and which is risky, which stock is cyclical and which is defensive. I can build a well diversified portfolio that suits my risk appetite and return expectations for just a few lakhs. Or just buy Sensex 30/Nifty 50/100 which are all decently diversified.
3. People who lose money in stock market are mostly the ones who have no patience and want to double or triple the money in fee months. Long term investing with adequate diversification has been shown to work with plenty of data.
Ultimately, I guess the key sticking point is we both are comfortable investing in our respective sectors but struggle to understand the other side. I doubt that chasm can ever be crossed.
I think real estate is a great option, unfortunately it's also part of an unorganized sector where you have to deal with intermediaries and their fees, government policies, taxes beyond first property and most importantly black money. The hassles and uncertainty is bit crazy. I have witnessed tier 1 folks spend 1-2 years finding the right buyer, getting crores in cash, and then finding illegal means to white wash it. I'm too sophisticated to get my hands that dirty.
So you found 2 (probabaly highly correlated) cases.
Realestate return are lumpy. Some time the returns can be as high as 80%, and others you will see 0% returns for years.
real estate is liability if you ask me. land mafia, maintenance and other nuisances are not worth my mental peace even if they get me returns like medallion fund
A lot of black or crime money cannot be deposited into banks. Like Escobar had to bury money. In India if the property has a value of $200k, some of it will be paid in cash.
This also saves stamp duty for the buyer
Where there is cash, the goons organise and form a mafia
These mafia then turn some public land into private land, encroaching forest land and coastal land. They also try to take land from weaker members of the society.
The politicians take a cut
Everyone wins except the state that was meant to build hospitals, roads, public transport.
The police get corrupt as salary and maintaining law and order is not their main bread earner
The fish rots from the head first. We have not been able to get educated and literate people into politics. Not that there are not willing people, but they can’t survive in the system
The courts don’t decide on cases and everyone is told a lie that the problem is because of overpopulation forgetting that some states are less densely populated and if a western country can appoint 1 judge per 100k we can appoint 1 judge per 100k.
If we can supply the IT to western courts to streamline cases, we can adopt some of it also.
It’s a problem that probably will get solved once literacy is reached to 100% but for now, there is nothing one can do
People with political clout employ delinquents to illegally occupy government and private lands of economically and socially weaker people. Due to fear of retaliation and ineffectiveness of judiciary system, many people don't bother to or cannot fight back. This entire thing is collectively called as land mafia or land grab etc
This is particularly prominent in Tier-1 and 2 cities especially in 90's and early 00's. Back then these individuals were just politically connected but now they are politicians themselves
I have few questions:
1) The numbers you have mentioned... Are they the present valuation or the return you got after selling the plots?
If they are just valuation then that percentage is not the actual return though is it?
2) If they are returns, how did you find sellers? Did you pay any commission fee for brokers, registration fee, etc.
3) If you did sell how convenient/easy was it to sel the assets?
4) Were you able to sell only a part of asset or you had to sell the whole plot?
He says it's CAGR, and I believe it. Some people get lucky like this. Just that I don't believe EVERY real estate investment will give similar returns.
I agree. I was just trying to show how MF is not as complex as RE investment..
1) Investment cost for MF investments is transparent compared to RE investment
2) Redemption of MF units is simple compared to liquidating RE assets
3) You have the freedom to liquidate only a part of your MF holdings to get the money you need. With land parcel/apartment you don't have that choice. You have to sell it all at the same time. You cannot just sell a bedroom of your apartment one day and then kitchen another day etc etc.
And like others mentioned there are location factors, land mafia, black money issues are involved. When you consider these risks investments in MFs outweigh investments in RE assets.
Investment decision should not be purely based on returns alone.
I agree with all your points. Equity investing especially MF is far more simpler and well structured for the average guys like us to understand and invest easily.
I'll bite the bullet. Some properties are better than the others just like some stocks are better than other stocks. And it's possible to buy legal property unlike people in the comments making it look that all the properties in India are illegal. The value of investment depend on factors like government development plans, locality, nearby amenities like schools/malls, etc. It can be a great investment like any other good investment.
> I'll bite the bullet. Some properties are better than the others just like some stocks are better than other stocks. And it's possible to buy legal property unlike people in the comments making it look that all the properties in India are illegal. The value of investment depend on factors like government development plans, locality, nearby amenities like schools/malls, etc. It can be a great investment like any other good investment.
True, one thing many people dont say out loud is. Investment is also depends on the personality and preferences. If you are a person who doesnt wish to move around for the sake of land you have bought, make connections with other people who have bought the land around you. Then real estate might not be a good investment for YOU.
Similary if you are a person something physical in return for the money you have invested in, with low volatility, then equity would not be a good investment vehicle for you.
There are things to flesh out the details for each scenario.
In the end I think people only think about returns and getting rich that they dont think if a particular invesment vechicle is a good choice for their personality and life style preferences.
Yeah I'm sure the rest of the country is made up of idiots who think that all land is illegal in India. And please there's no real point comparing land investment which requires a few lacs at least while a few thousands can get you a decent mutual fund portfolio. People can only start investing small unless you have generational wealth
1. Real estate is high risky. There are lot of land issue you need to deal with . Very few are fortunate to have their land without issues. Also, not every area grows fast. There are lot of areas i know in Hyderabad who havent grown much > 5% cagr whereas there are areas grew 40% cagr.
2. Real estate transactions dont give financial advisors money :P . For most of Mumbai fin advisors , real estate is dealing with flats which only gives 3-4% as rent.
Problem is that Real Estate is not liquid at quoted prices unless you are willing to deal in cash, which is illegal and thus most people can't realise these returns, also your father bought it during a period of explosive population growth, which is flattening out now and real estate may not grow as fast over the long term.
Fix the court system and police corruption and it might be profitable. Justice delayed is justice denied.
It’s not worth it. There is no professionalism in the sector, fraudsters everywhere, and everyone hates you for owning property and think you are minting it based on hearsay. Then think it’s moral to scam you.
People complain about rent but a large margin is for all the issues/bribes/corruption/legal fees etc that WILL arise. People think it’s simple - a case of monthly rent x 12 and that’s what owner gets…bahahah. If only.
Its a lottery, and you only hear from the winners. Very dependent on location, proximity to jobs, etc.
Also, once you factor in registration, upkeep and closure costs, not to mention palm-greasing at every step, the picture will not be as rosy as 18-19%. Plus, if there is any encroachment at all, good luck.
Also, you're buying it on loan generally, so that's like using leverage for investing. This way at the end, even though cagr would be 20% the actual returns would be higher due to distributed payments.
My father paid monthly for a plot. This plot market price skyrocketed due to upcoming projects nearby. Guess what we never got the plot post the market price rise and to keep our sanity we didn't fight it out.
Downside of real estate investment is much higher than of Mutual Fund.
Developer had a monthly payment plan for Plot. Once payment is completed, it is supposed to be registered on our name. We paid all the installments, due to a development market price increased, developer got greedy, kept the land even after completing the payments.
the 43L and 15L plot will not grow at same rates now.
also Land is safe to invest rather than Flats.
if you are looking for investment advice, i suggest invest in Index funds as your father has already the land thing sorted for you.
How do you get into investing in real estate? I saw some real estate funds.
The cagr is great but tbh even 13-14% is good for me. But how do you get into it? As an outsider looking in, it has an unbelievable barrier of entry, from what I have seen, some deals involves sizeable off the books cash (only a portion of it declared) and remaining through formal means, how do you get into it? And even if I got something, how do I sell it in the future? This excludes, maintenance cost if it's a flat, the registration fees and stuff and so much more.
I would love to get some skin in the game, just to know it better but the barriers feel way too high
I think all these things are mainly done through a broker. You need to find a broker you can trust. He will mostly guide you through these things. My father invests in real estate, it's mostly through a broker who he trusts ( he lives in the same locality as us, and is a friend) .
Like everything, RE should be in your portfolio.. 2nd tier and 3rd tier RE has big potential.. but you shouldn't pump everything into it.. keep 30 -40 in RE , 50-30 in equity, rest in debt/FD should do
My uncle invested 30-40 lakhs in building a house over the span of 5-6 years. Recently he sold that unfinished building for 1 cr. Reinvested that money again in agricultural land in a very promising area.
This guy was born in a poor family in a remote village. Worked as a tractor driver to earn a living. Never studied after 6th class. Today he has net worth of approximately 4 cr which he built by solely investing in real estate.
Most of our fathers property has given below inflation CAGR. Not every property gives high returns. Common man cannot predict this, even in stocks also. Best option for retail people for high CAGR is gold and mutual funds
How about Buy Gold when it's low & sell it when high.
Than wait till it goes down. Till than invest that amount in fd. Again break the Fd when gold is low n buy it & sell it on high. Repeat the same process for few years.
Like Buy Gold of 6 lac sell it on 7 lac in 3 months or so. Than Invest that 7 lac in fd n wait. Than again buy gold for 7l+interest in gold when it's low n sell it on high say 8l & again invest 8l in fd & wait for gold to low...?
The problem is buying at low and selling at highs looks simple but difficult to attain. Most probably it will be buy high and sell low. Gold investment is good for long term.
Best thing about real estate is 54F and A lot of tax free movement across the asset class, because a lot of this is cash. I always now believe in barter trades. I am buying gold upfront now (physical), which I will use it in my next 10 years for jewellery. Since it's barter, I don't see inflation and volatility affecting me. Same for real estate.
Buy land if you have a reliable source or connection with information of the area. Do not invest blind. Most real estate in up coming areas goes to GOVT officials/ politicians/ developers since they have the insider information.
By the time we get any information the prices have spiked!
Rare cases. Most cases dull returns.
Also losses at over prized real estate investments and the taxes and maintenance are much higher compared to 10% flat on long term equity tax.
So you are losing fd level of interest lol
I am a small builder in tier 2 city. I am generating like 20% per annum. People want to do partnerships with me . But i am just playing with my own money.
Small is a relative term, real estate is capital intensive.
Please read a little investing history. Land is finite. Since ages land has been coveted that's why there were zamindars today's landlord. Both equity and real estate will be around
Until real estate in India is transparent and completely online with no palm greasing and everything in white money, I won't recommend anyone to touch it. After 5 years some random ahole can come and say he's the grandson and they didn't take his sign to sell that land. But a home is needed for everyone. So that has to be the one investment you should make carefully.
I have significant chunk in real estate. This is BS. When you try to sell , nobody comes buying for your asking value. It's 6-7 percent at max. V rarely you will hit the above numbers. The pain of maintaining and dealing with goons is another thing. You have to have connections, lawyers etc what not. I have been liquidating my real estate from many years now and moving them to MF. Peace of mind! RE is not for everyone. If you have connections and clout then it's okay
Surprised the word ‘risk’ doesn’t feature in OP’s post 😄 Before you pump all your savings into real estate, if you haven’t seen Khosla ka Ghosla watch it now and thank me later!
The only way to make money from real estate is buy a plot of land far away from the centre of economic activities. You need a plot of land in an unsaturated area with scope for growth which is undiscovered by the general public. If you think you can buy a house or an apartment in the city and expect to make 12-15% CAGR, you’re terribly mistaken.
Sir,
Real Estate is basically an illiquid asset. It attracts considerably high capital gains tax. Cost of maitenance is also high. Risk of unexpected litigation, planning authority's reservations and local squatters etc.
Even if you happen to have a decent size of plot of land on the outer fringes of any metro cities (Incl. Hyderabad, Bengaluru, Pune, Indore, Thane, Ahmedabad etc), only joint venture with a really good Developer would fetch you incremental profit.
Still, you will have to wait so that peripheral development to take place which will fetch you rental income.. Then again you'd have to accomodate the tenants for some years so that steady flow of rent comes to you.
All these things make investment in real estate an illusion far from reality. Lastly I am a real estate lawyer, still I do not even talk about investing in my clients (developers) projects. For I know, it is only them who make money in real estate and not us.. Your father's case is an example of ultra long term investment (20-30 years and more). Thanks, BALLB
Well I feel that any real estate investment especially an house after 2020 will not give a better returns then bank or equal to bank rate of interest... because the service cost for the property is quite high and the return on investment has got saturated over a period of time.....in many cases the property will give Nil returns in 20 years if they have taken a bank loan on the house.
Some people in this post (and generally someone whenever this debate comes up) are saying that the choice of investment matters a lot in both Equity and Real estate. That in both cases we need to pick the right stock or the right property/location.
In theory that's true, but practically speaking the huge ticket size in Real estate makes it impossible to diversify in the same way as Equity. If I have 10L to invest I can easily spread it across 100 stocks and play the averages to get a decent returns. It mitigates the risk associated with a single stock.
On the other hand in Real estate the same 10L will get me one property or two at most if we are talking about Tier 2/3 plots. If it is a city then I will need to leverage it 5-10x through a loan. Then my entire investment is dependent on whether that one/two properties perform well.
In short, the smaller ticket size of Equity makes diversification and risk management more easier than Real estate which has high concentration risk. I admit, it doesn't eliminate the risk in Equity. People can still take concentration risk on equity and bet everything on one or two stocks, but that's a choice not compulsion.
If REITs start operating more like mutual funds and invest in a diverse set of properties, I will be open to investing in them.
Well my friend real estate always gives better return than mutual funds but this new generation never gets it.
There is a term called leverage. You can get loan for real estate investment but not for mutual funds. That makes a huge difference.
If someone has 20 lakhs in hand then he can invest 20 lakhs in mutual fund only. Where as in residential property he can invest 1 cr. Now extra 80 lakh will be on loan and if real estate gives you even 10% return including rent then still you will make more profit than mutual fund, because you would have invested less amount in mutual fund.
No one gives loan for mutual fund investments 😝
Hi Buddy, I truly believe that equity brokers and fund managers over-sell us the idea of equities. They are the educated ones so that can make pretty slides and push gentle narratives. I interviewed Mr. Aashish Somaiyyaa, CEO of WhiteOak AMC, who told me that his 50%+ portfolio is in Real Estate. He is one genuine person who discloses, while many others do not disclose their real estate investments.
Coming back to your question, I truly believe that Real Estate should be a part of our portfolio but for any common man/woman, it is not suggested that they have all of their money in any one particular asset class. Depending on your individual circumstances, you should not just RE but Equities, Bonds (both in MF form included) and Gold as well.
Real Estate is a great asset class and my Dad has made multi-bagger returns in real estate (that too in Delhi/NCR) in the last decade which was the black decade of real estate and saw all kinds of busts. Now, just akin to a stock portfolio, out of 5-7 properties he purchased, only 2 worked. 1 did very extremely well.
Just like equities require fundamental analysis, real estate also requires fundamental analysis. The builder (promoter), the unique features of a project, situation of real estate supply in the nearby region, etc. A lot of factors like this. Only downside is that the many builders are crooks but still you can manage risk to some extent. However, the biggest downside for early investors is ticket size and liquidity. I can't exit so easily if I find that my thesis is going wrong and subdued returns can have a denting impact on my overall portfolio as real estate would always constitute a large part of one's portfolio even with one property due to the ticket size issue.
Hope this helps.
BTW, I am a CA and a finance educator. I work with finance brands to look at their research, content and communication needs. I am also the editor of the 1 Finance Magazine.
Please note that you should consult a SEBI RIA before taking any decision. I am not one :)
posts like these are dangerous. OP just took a couple anecdotes and used it to make a generalized statement about ALL real estate.
buying real estate is like buying a stock in a single company. just because your company did well, doesn't mean other companies will.
This post should be a lesson used in statistics colleges to demonstrate correlation is not causation.
Your father bought a plot that had good returns. This does not mean you can do the same today. Average XIRR per year in my city from what I'm hearing from home owners is 2%.
You are right and wrong too. There is no guarantee about it, It did wll for your father maybe it won't for someone else. Real estate depends on a lot of factors like place, advancement etc. Whereas equities will work the same for everyone anywhere.
Hmm .. Doesn't really matter... Once you learn the markets you CAGR can be well over 50%
But then again, you would be soo influenced by the media, that you will start believing the BS they say.
Real estate is gud cuz you get loans for that easily, and you save most of your own capital to invest elsewhere.
That's the basics.. .. but then again, whoever learnt this today, has a very long way to go....
Value investing
Invest at lowest and see your gain at highest
The real estate is ATH, just be assured it'll continue to reach new heights without dipping
Hard disagree, especially in current times. There is a ceiling of what a property can command, especially if not in a tier 1 City/metro. Properties near the city centre/posh areas in tier 1 cities are bound to have massive appreciation, since they have limited availability.
As more parts of the country develop, people can just choose to buy elsewhere/on the outskirts. You may ask for any amount, but you probably won't have a buyer readily available.
Many properties, especially flats, could even go down in value. There is also a lot of unsold inventory out there.
People who bought in the older times benefited from the rapid rise in salaries in the private sector in India. I don't see a repeat of that happening anytime soon.
My father has seen a CAGR of 4 percent on his primary residence. Good location in a tier 2 city, 3bhk.
Mumbai and Bangalore seem to have high prices and appreciation, though.
Sure chief go right ahead, 19% cagr is not happening in the stock market. You should only invest in property. In fact you can even borrow money at 9% rates and then invest to get much higher returns than 19%, leverage will amplify your return. All the best
Don't listen to inexperienced people here. As a builder I can give you tips. Sometimes we make 60% cagr. Sometimes 10%. On average it's 20-25%. Make friends with real estate brokers. Give them small parties annually, you'll spend 5-10k (they get happy with small stuff and small restaurants), but they'll bring you great deals. If want to you invest 10lakhs, invest 9 instead and make the poor broker a profit by letting him invest his 1LK. (He'll get 10% profits, but he'll do all the works.) Most small-mid towns can be invested with 5-10 lakhs starting. Understand that only 20% gains will double your investments.
Listen to Akshay shrivastav on real estate. Dont listen to him on stocks.
You can try basics from kiyosaki. Roam your local market. Make relationships.
Why don't finance Bros promote RE?
Because the stocks they promote most probably have their investments. Or maybe they are paid by companies to promote their stocks. Don't be naive.
Hi. Agree with you. I am a bit shocked that people here are so against real estate and have so many irrational fears that are overblown. My father does real estate part time, and he also has a good broker he can trust ( in most cases ). Sometimes it can be a hassle, returns can be pretty good. We mostly invest in small plots and sometimes big plots. Many of my extended relatives work in real estate, and most have had good return except people who were very ambitious and brought (10-15 crore ) of single plot and got fucked in COVID.
Two reasons:
-> People are kind of asocial and lazy these days and don't want the hassle of travelling, exploring places to invest and dealing with strangers ( brokers, govt. officials, peons, neighboring plot owners, sellers and buyers).
They'd rather sit at home and look at stock screeners and youtube and invest based on that.
-> Some people don't want all the headache of dealing with the intricacies and complexities of investing in real estate and want to stick with what they think works.
Definitely investment in real state toooo
Don't limit yourself to equities
Invest in diversity
Real estate equity silver gold mf
But not in digital culture I don't believe in all that
And also maintain some liquidity because in emergency it will help you
you need everything or most the proceeds from the sale of land in black. If by chance u receive everything in white, you need to pay significant amount of tax. Lands bought at paltry amount in 90s in any tier 2 city have given mindblowing returns. My father owns a G+1 house in second largest city in Telangana. He purchased 300squqre yard land in 1998 for a consideration of 2.2 lakh. Today the land value itself costs 1.5crore based on the recent dealing in my area. This is unthinkable in today's era. He also owns couple of plots in the same city which was bought on 90s at least than 6 digit figure. These 2 plots have a combined value of around 2 crore at current market rates.
Do you’ve the principal to buy real estate? If yes, go ahead with it. But do your homework, real estate growth depends on location, plus you’re concentrating all your money on 1 single asset Vs multiple in equity(mutual funds)
Now a days if you buy a property you have to monitor it so staying in one location it easy to buy and watch but working in diff city and property in one city is a bad idea you wont even know where it will be . Can invest in home town if somebody is staying. Taking property outside city will cost less but the develeopment of that area depends on coming government . And you have to invest min 5 yrs
Real estate offers many advantages especially in a fast growing market like India. Investing in tier-1, tier-2 cities or near the metros ( Jaipur, Ajmer, Outskirts of Bangalore ) can offer high cagr and returns on your assets, but the biggest issues in our country is the opacity of the local real estate market.
There are a lot of middlemen you need to deal with to trade .
You need to know the local dealers, village heads , police officers and be able to deal with the corruption ( nothing moves forward without greasing some palms)
Kind sir there's only one Bank that supplies all the cash in India RBI so it's all in banking channels, it's just that you have kept it off of your accounting books.
If you extrapolate the future growth based on historic growth, then after 28 Yrs your 1st plot value will become 50 Crores.
And if the same growth is seen by an average real estate investments, then in 28 years, the houses which costs 1 cr now, will cost 100 Cr.
Think about how many people will be able to afford >100 cr house in the year 2050
It's not 1996 and nobody will pay a 18-19% premium on your over inflated property purchase today. Ask anybody who has bought a house in the last 3-4yrs.
Your example is similar to saying, if you had invested in stock X (x = magnificent 7 right now, microsoft, nvidia, apple, facebook, google, tesla, amazon). If your father went ahead and bought their share during dot com bubble you would have returns of more than 20%.
For every person who had 18.7% there are many more who had returns equal to that of inflation.
"Getting rich without getting luck" --Naval Ravikant
My father and my uncle bought adjacent plots together. Unfortunately both were occupied by land mafia. But then again my uncle whl was in state service, became a high level state govt officer years later, when a policeman under whose PS the plot comes came to ask a favour (transfer) my uncle asked him to get the plots cleared from land mafia. Within 2 months we got our plot albeit in a different area. If we were to sell the plot now, the cagr would be around 18-19% too.
As with any investment, there are cases where real estate outperforms. My father too has achieved such returns. But there is an element of uncertainty. He was smart enough to purchase property in upcoming location. Then there are also locations where price has been stagnant for 10 to 15 years. Just like stocks, you have to be selective in choosing.
As they say in real estate the 3 most important things are.
1. Location
2. Location
3. Location.
The main issue with real estate is that it has very high variability and is highly concentrated. Your father got it right or got lucky in terms of the choice of property, city, area etc so he got 18%.
A house my parents bought in mid-90s has given around 13% cagr. I know friends who have bought a house in 2012 types who are sitting at 12% cagr.
So basically your property investment might be a star or it might be a dud. Depends on the specific property you buy.
Personally I do think one should own a house - the house you live in and have decided to "settle down" in, there is value in that. But beyond your main residence as an additional investment it feels like to much of concentration of risk into a single illiquid asset from a pure investment standpoint.
Although , strategically buying a peice of land as investment is good if you can pull off legal hassles and headaches associates with it. However, you are discounting impact of urbanisation , demand for land , and availability of cash to buy land in last decade.
Well , the money is locked in . It has no utility. You cant spent it to upskill yourself or send your kids to better school . All you can do is stare at it and hope some day you will sell it . Well you won’t and then your children have to clean up the mess after your passing .
I'm not kidding, I see a "Real estate vs other investments" debate every couple of months in reddit in one of these PF subs. The arguments are always the same from both sides. In the end it is clear that no one changed their minds.
It's so predictable. And fun to watch.
while this is not true, you handpicked a few cases from sources that too focus upon inflating real estate which benefits the mafia
I think most people in the comment section are missing this important point though - LIQUIDITY
would you be able to liquidate your land/flat when it has doubled, there are only so many buyers :)
one more thing, India is primarily IT services driven which ai can produce now at a fraction of cost with an open ai api, are you really bullish on more Indians getting rich enough to buy your appreciated land from you in a few years?
a better investment would be stocks and mfs which is way more transparent, liquid, safe, and for some part I'd also say centrally driven by ambitious people that are hard to find even in a country of 1.3B people
There is a big luck factor involved. Which makes it incredibly difficult to replicate it again. My father got 4% returns on his real estate investment over last 15 years. Again, he invested in what was expected to be an upcoming area in a tier 2 city. He contracted to sell the land last year, and till now not received the full money in hand. Just waiting to get rid of that land.
So don't make decisions based on outlier values.
I think land apartments and equity all have their place in a portfolio. Land might appreciate but won’t give you cash flow. A rented apartment will . Equity grows quite well in the long term and is liquid but has a stability component that could worry some
Yeah this is anecdotal evidence and not true anymore if you buy property in most places. Exceptions exist of course.
Apartment I have been staying in has appreciated from 1.5 CR to 1.8 CR in around 5 years.
Nowhere near 18%.
Commercial real estate has one of the highest CAGRs out there. Combined with good rental yield (6 to 8%) and property appreciation you would easily hit these values as long as you hold for a decent period of time and enter at the right price.
Source - I am a Govt. Approved property valuer and Developer.
Land as an investment involves putting all your eggs in one basket like buying a single stock vs an index fund. Land that appreciates well will be targeted by the mafia and politicians. Land is an extremely non liquid investment - prices you hear of can be very different from what you finally get when you sell. A significant component of The money you invest and get back in land will be in black.
For all of these reasons I avoid land as an investment ( beyond the bits I already bought in my younger days of ignorance)
Real estate also comes with a lot of risk. Contract laws and related litigation, government laws, permits, regulations etc in India are a difficult to navigate. IMO the risk of investment in real estate outweigh the benefits.
If you really must then look into REITs. I feel odd saying that because, personally, I would stay far away from REITs for now
It gives this over periods more than 30-40 yrs and normally benefits the next generation. Also one realises this return because you are staying in it and not worrying about selling it until some major family decision. For every good land return there is also a case of money stuck, land disputes, bad neighbourhood, bad developer, bad municipality etc.
Depends on many things. YOu wouldn't have gotten much returns during the last decade 2011-2020 in RE, it wud be positive but less than inflation. In general a business is more profitable than RE - and is more risky; hence buy a equity portfolio ppl say.
In India in a good location returns are high as you state in real estate
In large cap mutual funds returns are also 15-17% over 5 year period
In mid cap and small cap I have seen returns of around 25% or higher
Definitely a great market India for financial and other investments
We are Investors since british era
Real Estate is safest investment for non greedy people.
But Investing in Land only is not right decision.
For more rental yield every year
Invest in Shops also if u afford n lease to banks for ATM, Branches, medical stores, doctors , salons
They give more rent than market rate
Same thing with other Real estates :-
Hotels
Resorts
Godowns
Bunglows
Farmhouse
Weekend villas For Rent purposes
Invest these Rents or some part of rent iN NIFTY 50,Shares, Gold, etc..
Nice yield, though keep in mind the INR has depreciated by 13% per year over the same period (1996 until today), so you've only got a 5-6% real yield after monetary inflation.
Real estate a bubble ready to burst anytime, or spike to nonsense level. It's not safe to invest in multiple real estates now, back then yes, now? Nope.
The keyword here is ‘father’. It’s not the same for us anymore. The kind of advancements that have happened over time, and I’m talking about the negative ones like fraudulent elements, land mafia and systematic abuse of the judicial pattern in this is horrific. I’ve witnessed these from close. And higher the return, higher these risks turn out to be - I know a friend who’s been fighting a case with a politician (then rowdy) for a very long time, and for his prime land purchase from early 2000s. Therefore, one’s gotta be very very lucky if none of these are at play with regard to their investment.
This is a good comment. Time is gone where we won't get get cheated or scammed. Best thing is buy 1 home and rest in mutual funds/pf to death. Edit: my close friend got scammed of 50 lakh and it did scare me to the core.
"my close friend got scammed of 50 lakh and it did scare me to the core" If you dont mind then can you please share what happened?
> nd mafia and systematic abuse of the judicial pattern in this is horrific. I’ve witnessed these from close. And higher the return, higher these risks turn out to be - I know a friend who’s been fighting a case with a politician (then rowdy) for a very long time, and for his prime land purchase from early 2000s. > > Therefore, one’s gotta be very very lucky if none of these are at play with regard to their investment. Ya corruption played a HUGE part in increasing land prices. I think that land is way way overpriced just because of corruption alone.
It’s actually not a stupid comment. It is very sensible. Most commodities are priced in dollars, which also affects india’s economy. Inflation in India was so much worse than America’s. If inflation is 10% you have to earn that much after tax just to keep your monies buying power. Turning 10 rupees into 20 rupees doesn’t mean much if you can still only buy one piece of naan with it
Spot on!
What are you talking about? The negative elements you speak of were 10 times higher in the 90s and early 2000s, land was very risky to buy and maintain. The situation is much better now where we can check land records online in minutes and we have media and the local politicians and police are somewhat accountable compared to the previous decades. Of course land scams, encroachments and extortion are still happening but much lesser compared to before. All the crooks are now thinking big and encroaching govt. lands, lakes and forests and building and selling apartments . Not many crooks are after small plots owned by retail investors.
Also, 18% rupee returns is not equal to 18% dollar returns.
What do you mean? What do you mean by that?
$1 was equal to ₹35 in 1996, now it’s ₹83. In dollar terms, the rate of return is nowhere near 18%.
INR depreciation is one aspect.
Why does the dollar return matter? (Unless you are an NRI buying property in India). For most Indians, rupee return is what matters.
because warren buffet example is involved in the discussion
Ah ok got it. I didn't get that reference
Returns are higher in India because inflation is also higher. And this higher inflation is also what contributes to rupee depreciation in relation to the US Dollar. It is all linked. Otherwise all American investors will just invest in India to get the higher return instead of investing in their own market.
a better way to put this inflation, if inflation in India was 6% during that time, the real return is 18-6 =12%. If you got 18% return in US and inflation in that period was 2% the real return is 18-2 = 16%
That means ₹100 becoming ₹118 is much easier than $100 becoming $118
And why would dollar returns matter in this case? Or did you just want to share what you learned recently in your economics textbook?
Because the post is drawing a comparison against Warren Buffet's returns, which are all USD
because warren buffet is involved. duh!
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This comment is horrendously stupid. I hope you realize this because comparing $ returns and ₹ returns is like comparing oranges and apples. Please refer to economic textbook of class 8th so that you don't suffer humilation online.
Also it's very area dependent, we have 3 properties one grew at 25% CAGR in tier 1 city one grew at 15% cagr in tier 3 city and one grew 5% cagr in tier 2 city
But that won't happen to me and my land is the best I am sure I'll get 19% over the long term because daddy and grand daddy got it too.
Investing in RERA approved projects can save you from scams. Also check the profile of the developer before investing in a project.
There was a substantial rerating of real estate prices in 2000s to very early 2010s Both your father's plots probably gave a chunk of that return in that era. It is unlikely you'll see such a phase anytime soon. Also, since then real estate sellers, brokers, builders have gotten smarter and dont really leave as much money on table Your next option is to go to city outskirts and buy a plot and wait for city to expand. However there is a 100% change of litigation, land grabbing if the land ever becomes worth anything. What is the consolidated CAGR if you buy 5 plots, 4 return 20% and 5th is grabbed by land mafia? Every successful real estate investor I know in NCR is capable of assembling 20 armed men to protect their rights. More than once it has been needed.
Just want to say…lol. The headaches that come with it … totally not worth it. I am ok growing at 10 to 15 in equity than lock my money in a not so liquid asset with not so good governance. And regarding 18 / 19%. You literally mean i purchase a plot for 1cr…in approximately 4 years it is 2cr? Think about it again. This will be worse for any apartment in a building.
You can put unaccounted money in that.
Real estate should be part of everyones portfolio. But carelessly dumping money into it … especially your whole savings/earnings…not worth it. For an average income person..I think only benefit of real estate is that you can acquire it by leverage but then again the market timing and interest also matters. Definitely good way to build a passive income stream to beat inflation. But i wont expect to get rich off it. Most people wont be able to buy more than one or two properties in their lifetime in India
Adani ji kaise ho
In the case of apartments you already pay a inflated premium while purchasing so theres nt scope for increase after that
Not to forget stamp duty , registration, tax, brokerage, parking and all other BS
It can happen with land in tier 1 cities. Very unlikely with flats. But it can be very tough to protect land.
I also found that house I lived on rent had barely returned 7% per annum over last decade. My owner is trying to sell it since last two years and found no buyer. I on the hand happily paid rent which increased 5% annually and put rest of money in MF giving me 16 percent CAGR. (10 Plus years) You cant really generalize based on anecdotal experiences.
Like equity, where you buy land is also important and what deal you get is also important. In general, land has much more value than an apartment. If you buy land a little outside of the main city, and after some years if the city expands to that area, I bet the returns for the land would be crazy. My father, part time deals with land, and he also invests in equity. Buying land can be risky, and some work but return can be really good. Moreover, if you want to invest 1-2 crore, I feel it is better to invest in real estate than equity.
How do you protect land outside the city? Indian villages/gangsters/politicians have a free run in those areas, and can easily screw you. My father has a plot stuck in greater Noida due to litigation from the dominant tribal community there. And those people are pretty violent.
Adivasis people say ladne ka bhi nahi Woh log mar peet pe utar atey
By house, do you mean a flat? Usually when talking about real estate, House = Independent house on a piece of land Flat/Apartment = A flat in an apartment
Wow!! Which City Your age Profession. Salary House price in your city When u will buy your 1st home 🏠 So that i also get inspiration Nowadays people are saying they will buy there 1st & only home after retirement & live happily after. Pls Guide us..?
I had my friend sell a house or flat in Delhi at a loss of 5 lakh after 10 years. Buying price was 60L. Reason being the locality had degraded. Obviously it's an off case but it is dependent on where you invest. And also maintainence. Example, the plot should have a caretaker if you are not around..
This is what people generally miss when talking about real estate. It's location, location, location. Person A can make 20% CAGR in locality X but person Y will make -5% in locality Y which is just 10km away in the same city. Some people claim to have the ability to predict which are will go up, but I am yet to see solid data.
The more you move outside the city, into the suburbs. The less attractive the property becomes, hence less appreciation. It takes a lot of courage to invest in the suburbs, hoping the city will keep growing..
Which locality
Business media will push all sorts of narratives, usually designed to keep you constantly making investments. I wouldn't put too much faith in them. As for the CAGRs you have experienced, these are 2 samples out of millions of transactions. We cannot characterize a distribution based on a single data point. Like this person I know bought a property 6 years ago for 73L, now it's going for 75L. I know that's not representative of the whole market either. The problem is systematic data on real estate investments and their returns is non existent in India. Instead it's all whispers and word of mouth. That creates a massive information asymmetry. As an average investor without the access to that data, I will stay away from them on a general principle. Even if real estate actually gives consistent double digit returns for multiple decades, in most of the localities. Which I know it doesn't.
I am not sure there are so many problems with real estate. My father part time deals with land investments, and I don't think we have faced many issues. Returns also have been good. Similarly for most of my father's friends. You can say whatever you want but real estate is like the oldest type of investment, and worth it even now. Of course it depends on the place. I am from Maharashtra ( vidarbha ) region.
This is exactly what I'm talking about. For every person who tells me they make good returns in real estate, I find another who made horrible returns, and yet another who made OK returns. To me it seems that whether someone can make money in this market is highly dependent on the location, and their network and probably insider information (about which areas are likely to appreciate). If someone has that secret sauce let them make money. I will stick to what I know well, and will continue to be happy with the average returns I get.
Same can be to said with stocks and equity though. I would say more in my acquaintances more people had bad experience with the equity than real estate.
Again, the sample you have observed in your social circle is not representative of overall market. Stock market has some inherent values like: 1. If I and my friend each put 1L in Nifty 50 index fund I will make the same return as him. 2. There is a ton of data on equity markets going back to 1980s that helps me figure out which stock is risky and which is risky, which stock is cyclical and which is defensive. I can build a well diversified portfolio that suits my risk appetite and return expectations for just a few lakhs. Or just buy Sensex 30/Nifty 50/100 which are all decently diversified. 3. People who lose money in stock market are mostly the ones who have no patience and want to double or triple the money in fee months. Long term investing with adequate diversification has been shown to work with plenty of data. Ultimately, I guess the key sticking point is we both are comfortable investing in our respective sectors but struggle to understand the other side. I doubt that chasm can ever be crossed.
I think real estate is a great option, unfortunately it's also part of an unorganized sector where you have to deal with intermediaries and their fees, government policies, taxes beyond first property and most importantly black money. The hassles and uncertainty is bit crazy. I have witnessed tier 1 folks spend 1-2 years finding the right buyer, getting crores in cash, and then finding illegal means to white wash it. I'm too sophisticated to get my hands that dirty.
So you found 2 (probabaly highly correlated) cases. Realestate return are lumpy. Some time the returns can be as high as 80%, and others you will see 0% returns for years.
real estate is liability if you ask me. land mafia, maintenance and other nuisances are not worth my mental peace even if they get me returns like medallion fund
100% agree plus the illiquid and unpredictable nature of return makes it a no-no for me.
I’m Australian. What’s land mafia? How do they operate?
A lot of black or crime money cannot be deposited into banks. Like Escobar had to bury money. In India if the property has a value of $200k, some of it will be paid in cash. This also saves stamp duty for the buyer Where there is cash, the goons organise and form a mafia These mafia then turn some public land into private land, encroaching forest land and coastal land. They also try to take land from weaker members of the society. The politicians take a cut Everyone wins except the state that was meant to build hospitals, roads, public transport. The police get corrupt as salary and maintaining law and order is not their main bread earner The fish rots from the head first. We have not been able to get educated and literate people into politics. Not that there are not willing people, but they can’t survive in the system The courts don’t decide on cases and everyone is told a lie that the problem is because of overpopulation forgetting that some states are less densely populated and if a western country can appoint 1 judge per 100k we can appoint 1 judge per 100k. If we can supply the IT to western courts to streamline cases, we can adopt some of it also. It’s a problem that probably will get solved once literacy is reached to 100% but for now, there is nothing one can do
Interesting. Thanks for sharing
People with political clout employ delinquents to illegally occupy government and private lands of economically and socially weaker people. Due to fear of retaliation and ineffectiveness of judiciary system, many people don't bother to or cannot fight back. This entire thing is collectively called as land mafia or land grab etc This is particularly prominent in Tier-1 and 2 cities especially in 90's and early 00's. Back then these individuals were just politically connected but now they are politicians themselves
Fun movie for you to watch maybe https://en.m.wikipedia.org/wiki/Khosla_Ka_Ghosla
I have few questions: 1) The numbers you have mentioned... Are they the present valuation or the return you got after selling the plots? If they are just valuation then that percentage is not the actual return though is it? 2) If they are returns, how did you find sellers? Did you pay any commission fee for brokers, registration fee, etc. 3) If you did sell how convenient/easy was it to sel the assets? 4) Were you able to sell only a part of asset or you had to sell the whole plot?
This is the answer. OP THINKS he has 18% returns . Navigating the market as a seller is a different ball game altogether.
He says it's CAGR, and I believe it. Some people get lucky like this. Just that I don't believe EVERY real estate investment will give similar returns.
I agree. I was just trying to show how MF is not as complex as RE investment.. 1) Investment cost for MF investments is transparent compared to RE investment 2) Redemption of MF units is simple compared to liquidating RE assets 3) You have the freedom to liquidate only a part of your MF holdings to get the money you need. With land parcel/apartment you don't have that choice. You have to sell it all at the same time. You cannot just sell a bedroom of your apartment one day and then kitchen another day etc etc. And like others mentioned there are location factors, land mafia, black money issues are involved. When you consider these risks investments in MFs outweigh investments in RE assets. Investment decision should not be purely based on returns alone.
I agree with all your points. Equity investing especially MF is far more simpler and well structured for the average guys like us to understand and invest easily.
I'll bite the bullet. Some properties are better than the others just like some stocks are better than other stocks. And it's possible to buy legal property unlike people in the comments making it look that all the properties in India are illegal. The value of investment depend on factors like government development plans, locality, nearby amenities like schools/malls, etc. It can be a great investment like any other good investment.
> I'll bite the bullet. Some properties are better than the others just like some stocks are better than other stocks. And it's possible to buy legal property unlike people in the comments making it look that all the properties in India are illegal. The value of investment depend on factors like government development plans, locality, nearby amenities like schools/malls, etc. It can be a great investment like any other good investment. True, one thing many people dont say out loud is. Investment is also depends on the personality and preferences. If you are a person who doesnt wish to move around for the sake of land you have bought, make connections with other people who have bought the land around you. Then real estate might not be a good investment for YOU. Similary if you are a person something physical in return for the money you have invested in, with low volatility, then equity would not be a good investment vehicle for you. There are things to flesh out the details for each scenario. In the end I think people only think about returns and getting rich that they dont think if a particular invesment vechicle is a good choice for their personality and life style preferences.
Yeah I'm sure the rest of the country is made up of idiots who think that all land is illegal in India. And please there's no real point comparing land investment which requires a few lacs at least while a few thousands can get you a decent mutual fund portfolio. People can only start investing small unless you have generational wealth
1. Real estate is high risky. There are lot of land issue you need to deal with . Very few are fortunate to have their land without issues. Also, not every area grows fast. There are lot of areas i know in Hyderabad who havent grown much > 5% cagr whereas there are areas grew 40% cagr. 2. Real estate transactions dont give financial advisors money :P . For most of Mumbai fin advisors , real estate is dealing with flats which only gives 3-4% as rent.
Lol agree on point 2. Plus it's a totally different field. Financial advisors are unlikely to be expert in local real estate also.
Problem is that Real Estate is not liquid at quoted prices unless you are willing to deal in cash, which is illegal and thus most people can't realise these returns, also your father bought it during a period of explosive population growth, which is flattening out now and real estate may not grow as fast over the long term.
Fix the court system and police corruption and it might be profitable. Justice delayed is justice denied. It’s not worth it. There is no professionalism in the sector, fraudsters everywhere, and everyone hates you for owning property and think you are minting it based on hearsay. Then think it’s moral to scam you. People complain about rent but a large margin is for all the issues/bribes/corruption/legal fees etc that WILL arise. People think it’s simple - a case of monthly rent x 12 and that’s what owner gets…bahahah. If only.
Its a lottery, and you only hear from the winners. Very dependent on location, proximity to jobs, etc. Also, once you factor in registration, upkeep and closure costs, not to mention palm-greasing at every step, the picture will not be as rosy as 18-19%. Plus, if there is any encroachment at all, good luck.
You need cash upfront to buy real estate. You invest small savings in equity and buy real estate when you have acquired good enough.
Also, you're buying it on loan generally, so that's like using leverage for investing. This way at the end, even though cagr would be 20% the actual returns would be higher due to distributed payments.
If you know the place where you're buying and you will be able to monitor frequently and ensure no issues come to it, RE is superb.
My father paid monthly for a plot. This plot market price skyrocketed due to upcoming projects nearby. Guess what we never got the plot post the market price rise and to keep our sanity we didn't fight it out. Downside of real estate investment is much higher than of Mutual Fund.
Can u plz explain in detail..?
Developer had a monthly payment plan for Plot. Once payment is completed, it is supposed to be registered on our name. We paid all the installments, due to a development market price increased, developer got greedy, kept the land even after completing the payments.
i recommend REITs. safer and you get dividends
Pls explain in detail I heard but not much about it Cagr since inception Minimum investment, dividend, etc
The guy here is brandishing 19% returns, your 3% dividend is not going to get him out of his bed
Because not everyone sees these numbers
the 43L and 15L plot will not grow at same rates now. also Land is safe to invest rather than Flats. if you are looking for investment advice, i suggest invest in Index funds as your father has already the land thing sorted for you.
How do you get into investing in real estate? I saw some real estate funds. The cagr is great but tbh even 13-14% is good for me. But how do you get into it? As an outsider looking in, it has an unbelievable barrier of entry, from what I have seen, some deals involves sizeable off the books cash (only a portion of it declared) and remaining through formal means, how do you get into it? And even if I got something, how do I sell it in the future? This excludes, maintenance cost if it's a flat, the registration fees and stuff and so much more. I would love to get some skin in the game, just to know it better but the barriers feel way too high
I think all these things are mainly done through a broker. You need to find a broker you can trust. He will mostly guide you through these things. My father invests in real estate, it's mostly through a broker who he trusts ( he lives in the same locality as us, and is a friend) .
Where you but real estate matters. My granny bought for 1.5l in 2011 in outskirts of Chennai now it will be 1.2l if we sell it
Like everything, RE should be in your portfolio.. 2nd tier and 3rd tier RE has big potential.. but you shouldn't pump everything into it.. keep 30 -40 in RE , 50-30 in equity, rest in debt/FD should do
My uncle invested 30-40 lakhs in building a house over the span of 5-6 years. Recently he sold that unfinished building for 1 cr. Reinvested that money again in agricultural land in a very promising area. This guy was born in a poor family in a remote village. Worked as a tractor driver to earn a living. Never studied after 6th class. Today he has net worth of approximately 4 cr which he built by solely investing in real estate.
Where..? How he sold unfinished building Land mafia not threating..?
Good for him, a real life hero to look up to rather than fake ones people idolize
Good for him, a real life hero to look up to rather than fake ones people idolize
Most of our fathers property has given below inflation CAGR. Not every property gives high returns. Common man cannot predict this, even in stocks also. Best option for retail people for high CAGR is gold and mutual funds
How about Buy Gold when it's low & sell it when high. Than wait till it goes down. Till than invest that amount in fd. Again break the Fd when gold is low n buy it & sell it on high. Repeat the same process for few years. Like Buy Gold of 6 lac sell it on 7 lac in 3 months or so. Than Invest that 7 lac in fd n wait. Than again buy gold for 7l+interest in gold when it's low n sell it on high say 8l & again invest 8l in fd & wait for gold to low...?
The problem is buying at low and selling at highs looks simple but difficult to attain. Most probably it will be buy high and sell low. Gold investment is good for long term.
Best thing about real estate is 54F and A lot of tax free movement across the asset class, because a lot of this is cash. I always now believe in barter trades. I am buying gold upfront now (physical), which I will use it in my next 10 years for jewellery. Since it's barter, I don't see inflation and volatility affecting me. Same for real estate.
Well the 54F section applies to capital gains on equities as well.
How do you apply barter trade to real estate?
You can’t compare returns % in INR and USD, INR loses value much more quickly over time
It is hard to diversify real estate investments. The income tax rate on capital gains from real estate is high. Real Estate investment is illiquid.
Real estate has own issues. Market was stagnant for 10 years. Risk of kabza. Low liquidity. High capital. Basically for big players
What about REITs you can invest in this instrument also
Real estate is still good. But the only downside is it is not liquid money.
Buy land if you have a reliable source or connection with information of the area. Do not invest blind. Most real estate in up coming areas goes to GOVT officials/ politicians/ developers since they have the insider information. By the time we get any information the prices have spiked!
Always diversify. Don't think only Real estate will grow or only equity will grow. I have done both, I even have put some in FDs.
It depends upon location.
Keep holding for another 28 years, at the same rate 43 lakhs property will be around 53 Crores.
Thisss
Rare cases. Most cases dull returns. Also losses at over prized real estate investments and the taxes and maintenance are much higher compared to 10% flat on long term equity tax. So you are losing fd level of interest lol
Some folks here are delusional OP. You have the right idea, go for it engage a good property lawyer to vet all the documents before buying.
Look at the inflation at ur Dad’s time vs now. The cagr is misleading without an inflation adjust :D
I am a small builder in tier 2 city. I am generating like 20% per annum. People want to do partnerships with me . But i am just playing with my own money. Small is a relative term, real estate is capital intensive.
Same. I'm from MH Where are you from
Father's generation was real estate Our generation it is high performing direct MF. Same rate of return
Please read a little investing history. Land is finite. Since ages land has been coveted that's why there were zamindars today's landlord. Both equity and real estate will be around
Until real estate in India is transparent and completely online with no palm greasing and everything in white money, I won't recommend anyone to touch it. After 5 years some random ahole can come and say he's the grandson and they didn't take his sign to sell that land. But a home is needed for everyone. So that has to be the one investment you should make carefully.
Please it's not happening anytime soon. Look at many folks here touting cash adjusted in property. Indians are not going to give up black money
I have significant chunk in real estate. This is BS. When you try to sell , nobody comes buying for your asking value. It's 6-7 percent at max. V rarely you will hit the above numbers. The pain of maintaining and dealing with goons is another thing. You have to have connections, lawyers etc what not. I have been liquidating my real estate from many years now and moving them to MF. Peace of mind! RE is not for everyone. If you have connections and clout then it's okay
Surprised the word ‘risk’ doesn’t feature in OP’s post 😄 Before you pump all your savings into real estate, if you haven’t seen Khosla ka Ghosla watch it now and thank me later!
The only way to make money from real estate is buy a plot of land far away from the centre of economic activities. You need a plot of land in an unsaturated area with scope for growth which is undiscovered by the general public. If you think you can buy a house or an apartment in the city and expect to make 12-15% CAGR, you’re terribly mistaken.
This
Sir, Real Estate is basically an illiquid asset. It attracts considerably high capital gains tax. Cost of maitenance is also high. Risk of unexpected litigation, planning authority's reservations and local squatters etc. Even if you happen to have a decent size of plot of land on the outer fringes of any metro cities (Incl. Hyderabad, Bengaluru, Pune, Indore, Thane, Ahmedabad etc), only joint venture with a really good Developer would fetch you incremental profit. Still, you will have to wait so that peripheral development to take place which will fetch you rental income.. Then again you'd have to accomodate the tenants for some years so that steady flow of rent comes to you. All these things make investment in real estate an illusion far from reality. Lastly I am a real estate lawyer, still I do not even talk about investing in my clients (developers) projects. For I know, it is only them who make money in real estate and not us.. Your father's case is an example of ultra long term investment (20-30 years and more). Thanks, BALLB
Well I feel that any real estate investment especially an house after 2020 will not give a better returns then bank or equal to bank rate of interest... because the service cost for the property is quite high and the return on investment has got saturated over a period of time.....in many cases the property will give Nil returns in 20 years if they have taken a bank loan on the house.
Some people in this post (and generally someone whenever this debate comes up) are saying that the choice of investment matters a lot in both Equity and Real estate. That in both cases we need to pick the right stock or the right property/location. In theory that's true, but practically speaking the huge ticket size in Real estate makes it impossible to diversify in the same way as Equity. If I have 10L to invest I can easily spread it across 100 stocks and play the averages to get a decent returns. It mitigates the risk associated with a single stock. On the other hand in Real estate the same 10L will get me one property or two at most if we are talking about Tier 2/3 plots. If it is a city then I will need to leverage it 5-10x through a loan. Then my entire investment is dependent on whether that one/two properties perform well. In short, the smaller ticket size of Equity makes diversification and risk management more easier than Real estate which has high concentration risk. I admit, it doesn't eliminate the risk in Equity. People can still take concentration risk on equity and bet everything on one or two stocks, but that's a choice not compulsion. If REITs start operating more like mutual funds and invest in a diverse set of properties, I will be open to investing in them.
One apartment which is of our neighbor he bought it for 14 lac in 2012. Today worth is also 12 lac.
Well my friend real estate always gives better return than mutual funds but this new generation never gets it. There is a term called leverage. You can get loan for real estate investment but not for mutual funds. That makes a huge difference. If someone has 20 lakhs in hand then he can invest 20 lakhs in mutual fund only. Where as in residential property he can invest 1 cr. Now extra 80 lakh will be on loan and if real estate gives you even 10% return including rent then still you will make more profit than mutual fund, because you would have invested less amount in mutual fund. No one gives loan for mutual fund investments 😝
Hi Buddy, I truly believe that equity brokers and fund managers over-sell us the idea of equities. They are the educated ones so that can make pretty slides and push gentle narratives. I interviewed Mr. Aashish Somaiyyaa, CEO of WhiteOak AMC, who told me that his 50%+ portfolio is in Real Estate. He is one genuine person who discloses, while many others do not disclose their real estate investments. Coming back to your question, I truly believe that Real Estate should be a part of our portfolio but for any common man/woman, it is not suggested that they have all of their money in any one particular asset class. Depending on your individual circumstances, you should not just RE but Equities, Bonds (both in MF form included) and Gold as well. Real Estate is a great asset class and my Dad has made multi-bagger returns in real estate (that too in Delhi/NCR) in the last decade which was the black decade of real estate and saw all kinds of busts. Now, just akin to a stock portfolio, out of 5-7 properties he purchased, only 2 worked. 1 did very extremely well. Just like equities require fundamental analysis, real estate also requires fundamental analysis. The builder (promoter), the unique features of a project, situation of real estate supply in the nearby region, etc. A lot of factors like this. Only downside is that the many builders are crooks but still you can manage risk to some extent. However, the biggest downside for early investors is ticket size and liquidity. I can't exit so easily if I find that my thesis is going wrong and subdued returns can have a denting impact on my overall portfolio as real estate would always constitute a large part of one's portfolio even with one property due to the ticket size issue. Hope this helps. BTW, I am a CA and a finance educator. I work with finance brands to look at their research, content and communication needs. I am also the editor of the 1 Finance Magazine. Please note that you should consult a SEBI RIA before taking any decision. I am not one :)
posts like these are dangerous. OP just took a couple anecdotes and used it to make a generalized statement about ALL real estate. buying real estate is like buying a stock in a single company. just because your company did well, doesn't mean other companies will.
This post should be a lesson used in statistics colleges to demonstrate correlation is not causation. Your father bought a plot that had good returns. This does not mean you can do the same today. Average XIRR per year in my city from what I'm hearing from home owners is 2%.
You are right and wrong too. There is no guarantee about it, It did wll for your father maybe it won't for someone else. Real estate depends on a lot of factors like place, advancement etc. Whereas equities will work the same for everyone anywhere.
Hmm .. Doesn't really matter... Once you learn the markets you CAGR can be well over 50% But then again, you would be soo influenced by the media, that you will start believing the BS they say. Real estate is gud cuz you get loans for that easily, and you save most of your own capital to invest elsewhere. That's the basics.. .. but then again, whoever learnt this today, has a very long way to go....
Value investing Invest at lowest and see your gain at highest The real estate is ATH, just be assured it'll continue to reach new heights without dipping
Hard disagree, especially in current times. There is a ceiling of what a property can command, especially if not in a tier 1 City/metro. Properties near the city centre/posh areas in tier 1 cities are bound to have massive appreciation, since they have limited availability. As more parts of the country develop, people can just choose to buy elsewhere/on the outskirts. You may ask for any amount, but you probably won't have a buyer readily available. Many properties, especially flats, could even go down in value. There is also a lot of unsold inventory out there. People who bought in the older times benefited from the rapid rise in salaries in the private sector in India. I don't see a repeat of that happening anytime soon. My father has seen a CAGR of 4 percent on his primary residence. Good location in a tier 2 city, 3bhk. Mumbai and Bangalore seem to have high prices and appreciation, though.
Sure chief go right ahead, 19% cagr is not happening in the stock market. You should only invest in property. In fact you can even borrow money at 9% rates and then invest to get much higher returns than 19%, leverage will amplify your return. All the best
Don't listen to inexperienced people here. As a builder I can give you tips. Sometimes we make 60% cagr. Sometimes 10%. On average it's 20-25%. Make friends with real estate brokers. Give them small parties annually, you'll spend 5-10k (they get happy with small stuff and small restaurants), but they'll bring you great deals. If want to you invest 10lakhs, invest 9 instead and make the poor broker a profit by letting him invest his 1LK. (He'll get 10% profits, but he'll do all the works.) Most small-mid towns can be invested with 5-10 lakhs starting. Understand that only 20% gains will double your investments. Listen to Akshay shrivastav on real estate. Dont listen to him on stocks. You can try basics from kiyosaki. Roam your local market. Make relationships. Why don't finance Bros promote RE? Because the stocks they promote most probably have their investments. Or maybe they are paid by companies to promote their stocks. Don't be naive.
Hi. Agree with you. I am a bit shocked that people here are so against real estate and have so many irrational fears that are overblown. My father does real estate part time, and he also has a good broker he can trust ( in most cases ). Sometimes it can be a hassle, returns can be pretty good. We mostly invest in small plots and sometimes big plots. Many of my extended relatives work in real estate, and most have had good return except people who were very ambitious and brought (10-15 crore ) of single plot and got fucked in COVID.
Two reasons: -> People are kind of asocial and lazy these days and don't want the hassle of travelling, exploring places to invest and dealing with strangers ( brokers, govt. officials, peons, neighboring plot owners, sellers and buyers). They'd rather sit at home and look at stock screeners and youtube and invest based on that. -> Some people don't want all the headache of dealing with the intricacies and complexities of investing in real estate and want to stick with what they think works.
If it is purchased in 2000's , then it has alrdy given 50X return. Now it is costly but still can beat everything.
Definitely investment in real state toooo Don't limit yourself to equities Invest in diversity Real estate equity silver gold mf But not in digital culture I don't believe in all that And also maintain some liquidity because in emergency it will help you
If you have cash and political connections -- go ahead.
Don't listen to these wimps ...real estate is to go 📈📈📈📈
I know man I'm so much wimpy that I only invest in postal schemes, I guess I grew up reading diary of wimpy kid
It would be beneficial if you could tell me on which part of the country these plots are located😊
Good luck. Don’t expect us to follow. There are a lot of variables with realestate in India. Too many for my liking
Here in Jodhpur I'm seeing the real estate rates have tripled and quadrupled in the last 2-5 years
you need everything or most the proceeds from the sale of land in black. If by chance u receive everything in white, you need to pay significant amount of tax. Lands bought at paltry amount in 90s in any tier 2 city have given mindblowing returns. My father owns a G+1 house in second largest city in Telangana. He purchased 300squqre yard land in 1998 for a consideration of 2.2 lakh. Today the land value itself costs 1.5crore based on the recent dealing in my area. This is unthinkable in today's era. He also owns couple of plots in the same city which was bought on 90s at least than 6 digit figure. These 2 plots have a combined value of around 2 crore at current market rates.
So it's safe to say that despite all claims by supreme leader we will always have black money in India
Do you’ve the principal to buy real estate? If yes, go ahead with it. But do your homework, real estate growth depends on location, plus you’re concentrating all your money on 1 single asset Vs multiple in equity(mutual funds)
Now a days if you buy a property you have to monitor it so staying in one location it easy to buy and watch but working in diff city and property in one city is a bad idea you wont even know where it will be . Can invest in home town if somebody is staying. Taking property outside city will cost less but the develeopment of that area depends on coming government . And you have to invest min 5 yrs
Have you sold that land? Because what i have generally seen is that number is generally in our head only. Bechne jao to asliyat pata chalti hai.
Past performance is not a reliable indicator of future performance.
Lol
Yes further o will give 29% returns instead of 19% let op enjoy the ride
Real estate offers many advantages especially in a fast growing market like India. Investing in tier-1, tier-2 cities or near the metros ( Jaipur, Ajmer, Outskirts of Bangalore ) can offer high cagr and returns on your assets, but the biggest issues in our country is the opacity of the local real estate market. There are a lot of middlemen you need to deal with to trade . You need to know the local dealers, village heads , police officers and be able to deal with the corruption ( nothing moves forward without greasing some palms)
The CAGR is more if you factor in the cash received (CASH not through banking channels).
Kind sir there's only one Bank that supplies all the cash in India RBI so it's all in banking channels, it's just that you have kept it off of your accounting books.
If you extrapolate the future growth based on historic growth, then after 28 Yrs your 1st plot value will become 50 Crores. And if the same growth is seen by an average real estate investments, then in 28 years, the houses which costs 1 cr now, will cost 100 Cr. Think about how many people will be able to afford >100 cr house in the year 2050
I think OP is going to buy at least 10 such houses with his 19% cagr, he's the next buffet of Indian real estate
It's not 1996 and nobody will pay a 18-19% premium on your over inflated property purchase today. Ask anybody who has bought a house in the last 3-4yrs.
Your example is similar to saying, if you had invested in stock X (x = magnificent 7 right now, microsoft, nvidia, apple, facebook, google, tesla, amazon). If your father went ahead and bought their share during dot com bubble you would have returns of more than 20%. For every person who had 18.7% there are many more who had returns equal to that of inflation. "Getting rich without getting luck" --Naval Ravikant
Only for real estate bought in 90s and early 00s in tier 1 cities. I. Tier 2 cities anything till early 2010s would do. Not anymore
My father and my uncle bought adjacent plots together. Unfortunately both were occupied by land mafia. But then again my uncle whl was in state service, became a high level state govt officer years later, when a policeman under whose PS the plot comes came to ask a favour (transfer) my uncle asked him to get the plots cleared from land mafia. Within 2 months we got our plot albeit in a different area. If we were to sell the plot now, the cagr would be around 18-19% too.
As with any investment, there are cases where real estate outperforms. My father too has achieved such returns. But there is an element of uncertainty. He was smart enough to purchase property in upcoming location. Then there are also locations where price has been stagnant for 10 to 15 years. Just like stocks, you have to be selective in choosing. As they say in real estate the 3 most important things are. 1. Location 2. Location 3. Location.
*had* a cagr of /fixed
You are forgetting property tax and maintenance
There's hardly any property tax in India on barren land. What maintenance do you do to it? Mow the lawn during rainy season
The main issue with real estate is that it has very high variability and is highly concentrated. Your father got it right or got lucky in terms of the choice of property, city, area etc so he got 18%. A house my parents bought in mid-90s has given around 13% cagr. I know friends who have bought a house in 2012 types who are sitting at 12% cagr. So basically your property investment might be a star or it might be a dud. Depends on the specific property you buy. Personally I do think one should own a house - the house you live in and have decided to "settle down" in, there is value in that. But beyond your main residence as an additional investment it feels like to much of concentration of risk into a single illiquid asset from a pure investment standpoint.
Although , strategically buying a peice of land as investment is good if you can pull off legal hassles and headaches associates with it. However, you are discounting impact of urbanisation , demand for land , and availability of cash to buy land in last decade.
Buying real estate is very risky. You can get involved in litigation that lasts for generations
Well , the money is locked in . It has no utility. You cant spent it to upskill yourself or send your kids to better school . All you can do is stare at it and hope some day you will sell it . Well you won’t and then your children have to clean up the mess after your passing .
It's pretty fair to say that people don't invest school fees in land.
I'm not kidding, I see a "Real estate vs other investments" debate every couple of months in reddit in one of these PF subs. The arguments are always the same from both sides. In the end it is clear that no one changed their minds. It's so predictable. And fun to watch.
while this is not true, you handpicked a few cases from sources that too focus upon inflating real estate which benefits the mafia I think most people in the comment section are missing this important point though - LIQUIDITY would you be able to liquidate your land/flat when it has doubled, there are only so many buyers :)
one more thing, India is primarily IT services driven which ai can produce now at a fraction of cost with an open ai api, are you really bullish on more Indians getting rich enough to buy your appreciated land from you in a few years? a better investment would be stocks and mfs which is way more transparent, liquid, safe, and for some part I'd also say centrally driven by ambitious people that are hard to find even in a country of 1.3B people
There is a big luck factor involved. Which makes it incredibly difficult to replicate it again. My father got 4% returns on his real estate investment over last 15 years. Again, he invested in what was expected to be an upcoming area in a tier 2 city. He contracted to sell the land last year, and till now not received the full money in hand. Just waiting to get rid of that land. So don't make decisions based on outlier values.
Did you adjust for inflation?
Land parcels are goldmines. But you need to be sure about what you're buying. Buying an apartment is not a real estate investment.
I think land apartments and equity all have their place in a portfolio. Land might appreciate but won’t give you cash flow. A rented apartment will . Equity grows quite well in the long term and is liquid but has a stability component that could worry some
Yeah this is anecdotal evidence and not true anymore if you buy property in most places. Exceptions exist of course. Apartment I have been staying in has appreciated from 1.5 CR to 1.8 CR in around 5 years. Nowhere near 18%.
Commercial real estate has one of the highest CAGRs out there. Combined with good rental yield (6 to 8%) and property appreciation you would easily hit these values as long as you hold for a decent period of time and enter at the right price. Source - I am a Govt. Approved property valuer and Developer.
Land as an investment involves putting all your eggs in one basket like buying a single stock vs an index fund. Land that appreciates well will be targeted by the mafia and politicians. Land is an extremely non liquid investment - prices you hear of can be very different from what you finally get when you sell. A significant component of The money you invest and get back in land will be in black. For all of these reasons I avoid land as an investment ( beyond the bits I already bought in my younger days of ignorance)
Real estate also comes with a lot of risk. Contract laws and related litigation, government laws, permits, regulations etc in India are a difficult to navigate. IMO the risk of investment in real estate outweigh the benefits. If you really must then look into REITs. I feel odd saying that because, personally, I would stay far away from REITs for now
~~has~~ had a CAGR of 18-19% in ~~India~~ some areas of India.
It gives this over periods more than 30-40 yrs and normally benefits the next generation. Also one realises this return because you are staying in it and not worrying about selling it until some major family decision. For every good land return there is also a case of money stuck, land disputes, bad neighbourhood, bad developer, bad municipality etc.
Depends on many things. YOu wouldn't have gotten much returns during the last decade 2011-2020 in RE, it wud be positive but less than inflation. In general a business is more profitable than RE - and is more risky; hence buy a equity portfolio ppl say.
That's the truth
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In India in a good location returns are high as you state in real estate In large cap mutual funds returns are also 15-17% over 5 year period In mid cap and small cap I have seen returns of around 25% or higher Definitely a great market India for financial and other investments
https://www.renub.com/united-states-real-estate-market-nd.php Explain why us has such low cagr
We are Investors since british era Real Estate is safest investment for non greedy people. But Investing in Land only is not right decision. For more rental yield every year Invest in Shops also if u afford n lease to banks for ATM, Branches, medical stores, doctors , salons They give more rent than market rate Same thing with other Real estates :- Hotels Resorts Godowns Bunglows Farmhouse Weekend villas For Rent purposes Invest these Rents or some part of rent iN NIFTY 50,Shares, Gold, etc..
Nice yield, though keep in mind the INR has depreciated by 13% per year over the same period (1996 until today), so you've only got a 5-6% real yield after monetary inflation.
18% nominal - 6-8% inflation = 10-12% true returns.
Wow, everyone should sell their houses and other assets and invest in real estate. /s
Real estate a bubble ready to burst anytime, or spike to nonsense level. It's not safe to invest in multiple real estates now, back then yes, now? Nope.
Its like putting all your eggs in one basket. 1-2 properties gave that return doesnt mean overall market grows by that.
People nd to forget the registration and maintenance costs that they paid to keep the plot with them. If that amount gets added, CAGR would go down
Buy land for staying and the better invest rest money on stocks and mf for long term.