Thursday, July 25, 2024

With Inflation on the Rise, Is Real Estate a Secure Investment?

Over the past two years, we’ve witnessed a sharp surge in prices, a volatile market, evolving demands, shifting socio-economic conditions, rising interest rates, and more. Inflation has unmistakably surged, hitting 7% in August 2022, up from 6.71% in July 2022, surpassing market expectations that were hovering around 6.9%.

Amid these circumstances, one sector stands out as a dependable hedge against inflation: real estate. Real estate is often touted as the most favored asset class and a secure investment option in India. But is this assertion accurate? Let’s delve into it.

Why is real estate seen as a reliable choice?

Following agriculture, the real estate sector is the largest job generator in India. Projections indicate that the Indian real estate market will grow to a staggering US$ 1 trillion by 2030, a substantial increase from the US$ 200 billion mark in 2021. Over the next three years, experts anticipate real estate to contribute 13% to India’s GDP, displaying a Compound Annual Growth Rate (CAGR) of 9.6% by 2027.

Another crucial factor expected to boost this market in the coming years is the government’s initiatives to enhance infrastructure, including roads, railways, and bridges, which will undoubtedly stimulate the Indian real estate sector.

How does inflation impact real estate?

Inflation has both positive and negative implications for real estate.

For property owners, it brings good news as rents are likely to increase, leading to higher cash flow and a growing demand for rental properties.

For prospective homebuyers, it may raise concerns as property prices are set to rise. However, for current homeowners, this is a positive development as it appreciates the value of their homes, resulting in a greater Return on Investment (RoI). Developers, on the other hand, may have concerns as construction costs surge.

Despite these dynamics, financial advisors and investors have consistently favored real estate for its ability to withstand the pressures of inflation while preserving and augmenting value. Real estate offers the flexibility to diversify your investment portfolio as per your needs while delivering relatively robust returns.

Our Perspective

The time is opportune, and the moment is now. The key to success is sound guidance. With more advantages than disadvantages brought about by inflation and with technological advancements poised to reduce operational costs, investing in real estate is unquestionably a stable and dependable long-term investment. So, don’t let your money languish in a stagnant Fixed Deposit. Make a smart move, save on taxes, and reap profits.


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