Real Estate Tips

Which is the smart investment idea? Real estate or Stocks?

Written by Team Urban Tree


This question is much like asking “which one is better Aston Martin or a Bentley?” Both these investments have their own highlights and offer significant earning scopes. However, when you have to pick a side between these two – most Indians opt for the real estate investments. Why? Because a piece of real estate comes with certain characteristics that console the minds of the Indian investors. There might be many people who know nothing about stocks and shares, but there are hardly any people who do not know anything about property investments! The physical presence of a property is a big differentiator, psychologically than the intangible nature of stocks.

A recent comparison between the earnings of the stock market tycoons against the real estate tycoons found that the latter group of investors was gaining more profits on a year-on-year basis. Although the stock markets in India have remained quite stable in the last few months, its gains are of no match for the high yields from the rental properties. These are perhaps some of the reasons why investors in India have a higher preference for real estate investments overstocks! Some of the other highlights of investing in real estate over stocks are mentioned below:

Pros of Real Estate Investment over Stocks

#1. More in Control

Real estate investments put you in charge. You are acting as a CEO for your investment. You can decide the future of your investment. If a property needs improvements, you can carry out the repairs. If you want to cut down the costs, then you can easily trim down the maintenance costs. If you are after higher yield, then there is, of course, the choice of hiking the rental rates. So, you have overall control and run the show as you want to. On the other hand, when you invest in stocks you have to rely on the management of a company and hope that they will make all the right decisions. So your gains through stock market investment hinge the decision of others!

#2. Meeting Debts with Other People’s Money

This is the wonder of real estate investment. If you have invested in an apartment, which is ready to move in, then you can start earning from day one. If the property is available at a promising location you can rent out the property as soon as it is ready. This gives you an opportunity to pay off your home loan through the rental incomes. And in the process, you will earn some profits too! Stocks, on the other hand, might cost less (as compared to owning a piece of real estate) but you will have to shell out the entire money from your pockets and anticipate getting high returns when the time comes.

#3. The Tax Benefits

The government of India offers handsome Income Tax concessions for individuals who have bought a property and are paying home loans for the sake. This creates a win-win situation for the investors. Albeit they have to pay some taxes for their rental incomes, yet they can make significant savings. No such Income Tax concession scheme is available for the stock investors. This is one of the foremost reasons why people can readily plunge into real estate investments.

#4. It is Tangible

As mentioned above, a property is a tangible thing – you can see it and feel it. It is not a piece of paper with some writing, as is the instance with stocks. This tangible nature of real estate has a huge psychological impact on the minds of the investors. They feel more associated with their investments.

#5. Simplicity in analyzing the gains

Analyzing your gains from real estate investment is a child’s play! All you have got to do is calculate your debt (home loan EMIs) and match them against your rental yields. If you are paying off the loan at the rate of 3% and making rental yields at the rate of 6%, then you are winning! The calculations for gains in the stock investment are not this simple. You have to often rely on the company reports and the management personnel can use multiple ploys to project a brighter picture (than it really is) through their shrewd reports. So, your judgments remain clouded with investments in stocks or shares.

#6. It is less volatile in nature

The market conditions change from time to time, and you never know when India might face a financial downturn. In such times, your stock investments would go down the drain as soon as the market takes a dive. But your property would still remain afloat and generate income. Let us give you an example from the financial meltdown that USA faced some years back. While the stock investors were going crazy with their losses, the owners of vacation homes in various parts of the country were earning high dividends through the steady influx of tourists.

#7. Ignore the Global

The problem with stocks is that they are always hanging on countless factors. Even a crisis in Sweden could lead to significant losses for you in the market. Most stock investors try to seek huge gains and MNCs are their routes for that. This brings the global factor into the equation. While the property you purchase is very local in nature. It won’t be affected by Brexit, Trump’s policies or any other such global factor. You need to count only the local factors, and that is quite easy, isn’t it?

#8. A Sense of Pride

Imagine you are driving and you come across your plot of land, you will have great pride in showing that plot to your friends and relatives. Whereas, a piece of paper does not have that kind of sentimental value.

Though stocks have their own highlights, standing in the present era real estate investment is a much better and safer option. Do you agree with our point of view? Then write back to us.

About the author

Team Urban Tree

Urban Tree are the creators of magnificent homes in Chennai. Urban Tree is committed to creating world-class homes featuring innovative new styles that are meticulously integrated into every aspect of modern day living.

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