Is Investing In Real Estate At A Young Age A Good Decision?
Real estate is often described as one of the safest investment options. Read on to find out if it is ideal for youngsters to invest in real estate
The generation before millennials invested in real estate, not only for the returns that the asset generated, but also for safety and security reasons. Besides, it was one of the few bankable options available. However, despite several investment avenues that are available today, several youngsters aspire to buy property at a young age. Let’s understand the reason behind this trend, and its pros and cons.
Real estate as an investment
Even using the simple economic rule of demand and supply tells us how precious land is. The finite land resource will only get dearer as the population increases. “Real estate is considered one of the safest and low-risk investments. Even if the prices dip a bit due to global factors, like recession or pandemic, the prices will surely bounce back in the long run. Unlike gold, equity, or other instruments, real estate is an asset, which you can use or rent out, and still generate long-term profits,” shares G Ram Reddy, vice-president, CREDAI national.
According to Anarock Research, the property prices in all the major seven cities of India have grown at a steady rate over the last 10 years – from 2012 to H1 2022. The average residential price in MMR was Rs 9,075 per sq ft in 2012 and today (H1 2022) it stands at Rs 11,350 per sq ft. This means that a standard 1-BHK (370 sq ft) was priced at Rs 33,57,750 in 2012 and the price of the same flat now stands at Rs 41,99,500. The return on investment in the last 10 years for the said property stands at around Rs 8.5 lakh, thus giving real estate a low-risk investment tag. A similar trend can be seen in other cities as well.
Benefits of investing in real estate at a young age
Investing in real estate at a young age has a few merits. Talking about the same, Himanshu Jain, vice-president of sales, marketing and CRM at a real estate company says, “Since you have secured an asset at a young age, your financial stability increases multifold. You also have more time at hand to let the property appreciate over the years. In times of financial crisis as well, having a property at your disposal is beneficial.”
Additionally, real estate also helps you diversify and balance your investment portfolio.
Talking about finances, most opt for a home loan to buy a home. With age on their side, a young gun has the option of longer tenure with lower EMI, thus reducing their financial burden. As one grows old and climbs up the corporate ladder, the income also increases, thereby allowing them to make pre-payments or increase their EMI amount and manage their loan better.
Additionally, there are a few tax benefits as well. You can avail of income tax benefit of up to Rs 1.5 lakh on the home loan interest paid. This deduction is available under section 80 EEA and it is over and above the existing deduction of Rs 2 lakh for interest payment that is available under section 24(b) of the Income Tax Act.
Drawbacks of entering the real estate market at a young age
Jay Morzaria, president, NextGen NAREDCO India shares, “The decision of whether you should invest in property at an early age depends entirely on your cash flow. If you have a secure income stream or if you think you can make the payments easily for the property purchased, only then consider buying early.”
“Real estate is a high-ticket investment. Before you invest, keep in mind that you are technically locking in a huge sum at an early age as well as taking up financial liability (EMI payments). This may cause a liquidity crunch for some time,” opines Anmol Gupta, financial planner, and founder, 7 Prosper. It would also limit your investment diversification; it is thus crucial that you draw up a proper financial plan before investing so that you know exactly where you stand financially at least till the time the home loan is paid off.
Things to keep in mind while buying a property:
Consult an expert and thoroughly draw up your financial plan; EMIs should not cross more than 25-30 per cent of your monthly income; Don’t invest 100 per cent of your savings in real estate
Source: Times Property ( https://bit.ly/3daKRLB )