WHY REAL ESTATE INVESTMENT IS BETTER THAN GOLD INVESTMENT?

Introduction

Real estate and gold are integral to every Indian household including their hopes and dreams for a better future, not just for themselves, but also for their family’s future when the key members may be long gone. Our generations have built houses or bought properties to enable their children to have financial security as well as add to their status in society. Along with landed property, the shiny yellow metal has also been seen in equal merit.

Gold is much more easily translated to currency than real estate due to the legalities involved. Mothers handed over their gold inherited from ancestors to their daughters as a security and as a standby during times of trouble. At the same time, while real estate has realised higher gains, the same cannot be said about gold, where prices fluctuate. This brings us to the question of whether the real estate investment is better than gold?

Investment options: Real estate or gold?

Deciding which one of these instruments makes for a better deal depends on a number of parameters that require careful consideration since both have their merits and drawbacks.

· Appetite for investment

Real estate, because it is a scarce resource, enjoys a much higher value over a period of time. Purchasing real estate means putting down a considerable amount as down-payment and if required, go for debt financing to pay the rest of the amount. The best part about investing in this sector is the inverse ratio that works in your favour: since land is limited, there is huge demand and not surprisingly, the price rise is also aggressive. On the other hand, investment in gold is much more flexible since you can choose how much you want to invest, depending on your appetite. You 

· Pricing

The price of real estate is not necessarily transparent like gold where the bullion rates are in the public domain. Though real estate also has an applicable guideline value, the price negotiation is subject to other factors and is not standardized.

· Liquidity

Gold is easier to liquidate and does not follow legal hassles like the real estate sector. Buying and selling gold is immediate unlike the sale of property that can extend over time due to the law of the land.

· Market forces

Gold is much more sensitive to changes in the political-economic situation in the country. While real estate prices can also get hurt, it is comparatively less volatile.

· Tax Benefits

Gold deposit certificates are exempt from taxation while gold by itself is subject to capital gains tax. Real estate, on the other hand, enjoys different aspects that are considered during tax calculation such as cost of repairs and maintenance, legal services, and depreciation.

While investing in either, it is always best to weigh the pros and cons and weigh it against the need before taking the final call.