Why real estate investment beats the stock market

The stock market has always played the role of a barometer to the economic mood of a nation. Real estate is one of the prime elements in the latter context. In fact, an interesting and important relationship exists between real estate investments and the stock index. While both offer a profitable investment opportunity, both also carry risks that complement each other.

A common belief has been that the profit margins associated with stock investment has been higher when compared to alternative asset investments. Stocks are liquid and flexible, whereas real estate is not. Also, stocks offer growth rates that real estate investment can rarely match. Lastly, stocks are also easier to acquire and operate than buying a property as investment. Investment property also includes several added elements like insurance, maintenance, taxes, legal fees, broker commissions, etc.

It has also been observed that dramatic movements in the global stock market will throw up salient differences between real estate and equity investment. The strength and weakness of the global economy appears to influence both real estate and stock prices. According to the CXO Financial Advisory Group based in U.S., real estate and stocks are negatively correlated. After the great recession, the stock market lost about 60% of its value. With loans getting cheaper, people now invested more in real estate, since it promises guaranteed returns in the future.

A crucial point to note here is that while stock prices can rise and fall, real estate investment almost always brings in more profits. In fact, the allocation towards real estate in most investors’ portfolios has steadily risen since the Global Financial Crisis. This is because investors seek to take advantage of the low correlation between the asset class and equity market.

We already know that volatility is always caused by the monetary and fiscal policies of governments, and this has effectively increased the focus on real estate investments. Rising inflation has the same kind of effect on both investments. Increased inflation lowers the currency value, and in turn drives up the price of assets – real estate very prominent among the asset classes.

The outcome of stock market volatility is more evident if one follows the changes in real estate markets. Real estate investment provides more stability and can also deliver a continuous income stream, and this is why it attracts more investors. The slow but steady correlation between the stock markets and real estate markets provides the important advantage of diversification in an investor’s portfolio.

Also, investors can be more confident of constant returns, since the real estate market is relatively immune from both short and long-term price swings. Stocks, on the other hand, are subject to constantly changing prices, and investors can be placed in really tough situations when choosing whether to hold or sell their stocks.

To conclude, both assets offer long-term appreciation of value. However, if one is looking to create a strong portfolio and has the right kind of funds to invest, real estate will always be a safer and less stressful platform. After all, the demand for homes will never cease as long as we continue populating the planet – what can be a better source of assurance for an investor?

 Source – DNA India

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India’s top 50 real estate investment destinations of 2015

Makaan.com, conducted a research to identify top areas for property investment in 2015. The research was conducted to help the investor community identify & shortlist areas that hold the promise of good returns based on their past performance. The analysis was conducted basis data compiled in March 2015 and tracked the residential property price movement over the past one year and came up with a list of 50 localities / areas with maximum price appreciation (please see the table below). The research also gave property recommendation for people falling under different income brackets.

There are 14, 11, 9 and 7 localities / areas from Mumbai, Delhi NCR, Pune and Bangalore respectively making them the most favored among the investor’s community. Chennai and Ahmedabad are represented by 3 areas each whereas Kolkata and Hyderabad got represented in the list with 2 and 1 area(s) respectively. We hope you benefit from this analysis.

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City wise analysis of Top 50 areas for property investment in India

Mumbai: Mumbai seems to be the most favorable investment destination as 14 areas feature among the top 50 list. Chembur East in Mumbai Central Line, Vile Parle (East) & Bandra (East) in Mumbai South-West and Goregaon (East) in Mumbai Andheri-Dahisar have posted over 20% price appreciation. Mumbai has seen stabilization in property prices on account of un-sold inventory and delay in new project approvals. Areas in Thane and Navi Mumbai are finding favor among the investors who want to invest in sub 10,000 psf properties with the promise of high returns

New Delhi: A total of 11 areas from Delhi NCR feature in the research. It seems the city has been able to hold on to the momentum inspite of the overall fall in property transaction in the past year. Most of the high growth areas are in the NCR region of Noida, Greater Noida, Ghaziabad and Gurgaon. Prominent areas in the top 50 list include Techzone – 4, Pari Chowk, Noida Expressway in Greater Noida; Sector-46, Sector-120, Sector-110 in Noida; Sector 54 and Sector 73 in Gurgaon. All these have appreciated by between the range of 45% to 21% in the past one year essentially because of infrastructure development, connectivity and lower base price. Rohini in North Delhi is the only locality that is in main city of Delhi and has featured in the top 50 investment list, the area has given 11% price appreciation. Areas in Delhi NCR that have given the best returns to the investors are Sector 46 Noida, Sector 54 and 73 in Gurgoan. Property prices in these areas have appreciated in the range of 35-45%.

Pune: The top areas that have appreciated the most in Pune are Ambegaon, Bibewadi, Chinchwad. These areas have shown an appreciation ranging from 22-26% over a period of one year. Pune has seen a continuous influx of IT companies and the city is emerging as a viable option for investors from Mumbai. This trend is likely to continue for the next few years.

Bangalore: Bangalore has 7 area which are featured in top 50 investment list of which RMV in Bangalore North, Rajarajeshwari Nagar from Bangalore West, HAL Layout from Bangalore East, are the 3 areas in Bangalore that have given the best price appreciation. Property prices here have appreciated by between 7-21% in past one year. The ongoing metro corridor is casting a positive rub off on some of the nearby areas which might have caused favorable sentiments.

Ahmedabad: Prahlad Nagar and Satellite Road from Ahmedabad West and Gandhi Nagar from Ahmedabad Central are the 3 areas in Ahmedabad that feature among the top 50 list. The city’s localities have shown an increase in prices in the 11-16% range

Chennai: Porur in Chennai West and Pallavaram, and Thoraipakkam in Chennai South are also featured among the top 50 list. Property prices in these region have appreciated between 11-28%. The top investment locality of Chennai is Thoraipakkam which has shown 28% appreciation.

Others: Kondapur from Hyderabad, Garia and Tollygunge localities from Kolkata are other areas that have made it to the top 50 most investor friendly areas in India. These areas have given an appreciation between 8-11%

Commenting on the research, Aditya Verma CEO of Makaan.com said “Over the past 12 months property prices in India have moved in a narrow range with a slight negative bias. Just like one can identify good stocks in a depressed stock market, one can identify good investment areas in the current property market. Overall property prices in India are likely to remain stable over the next 12 months. Investors can take advantage of this situation and strike a good bargain”

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