7/8/2021 As RBIs House Price Index growth continues to moderate, Equity markets surge - Tata Capital Blog

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Wealth Management

Investment in Property v/s Investment

in Equity: Where to invest

By tatacapitalblog —
May 10, 2021

 Twitter   0

Real estate and stocks bracket the investment spectrum, both offering
potential for wealth creation but poles apart in nature. While the housing
market in India has provided time-honoured options for investment, today,
investors are also parking their funds by investing in stocks.

If you are wondering if you should invest in real estate or stocks, this article is
for you. Read on to understand everything you need to know about investing
in stocks and real estate and choose the investment option suitable for you.

Consistency in returns

Real estate investments

While considering any financial instrument, it is crucial to look at returns. In real
estate investment the returns can be inconsistent.

Besides, the housing market, once proliferating, has been slow in the last

decade. According to the Reserve Bank of India (RBI) House Price Index (HPI),

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the sector’s growth has been sluggish and has slipped from 22-23% in FY11
and FY12 to 3.4% in FY19, reported the Mint. The figures further declined to
2.8% in 2020.

Moreover, a report from 99Acres.com indicates that India’s rental yield is one
of the lowest worldwide at 2-3%. Here, rental yield denotes the annual rental
return rates which investors earn against their invested capital in the housing
property.

That said, rent from real estate investments acts as a steady source of income.
And housing investments are a useful hedge against inflation since property
value and rents skyrocket during the same.

Equity
Stock prices are comparatively more volatile, especially during periods of high
inflation but deliver a high potential for capital appreciation. In emerging
economies like India, higher inflation rates are directly proportional to the
volatility of stock movements.

However, mutual fund investments generate great returns and have shown
consistency in the recent past. Equity funds, among various others, have
consistently delivered high returns.

Additional Read: Do the fundamentals of investing remain the same after a

roller-coaster 2020?

Costs incurred        

Real estate
Investment in real estate typically incurs expenses, including registration,
stamp duty, maintenance, society charges, tax, brokerage, utility costs, etc.
Besides, if you have financed your property purchase with a loan, EMI charges
also apply. After renting out the property, rental values can compensate for the
charges.

Equity
Here, the most common expenses include brokerage charges, stamp duty,
securities transaction tax, and more. For equity investments, you don’t
essentially need a large corpus of money; you can start by investing with small
amounts.

Liquidity    

Real estate


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7/8/2021 As RBIs House Price Index growth continues to moderate, Equity markets surge - Tata Capital Blog

While housing investors possess the tangibility of owning an asset, these

investments aren’t as liquid and taking money out isn’t easy. If you wish to sell
the property, finding a suitable buyer, and undergoing paperwork and
registration is important to amass desired profits.

Equity investments
Here you can liquidate your funds and sell them quickly with a trading account.
All you need is some minutes online during the trading hours to sell your
stocks and exit your investments.

Performance and diversification     

Real estate
Real estate investments offer little or no scope of diversification. You potentially
invest a sizeable sum in instalments or lump sum in a vacant, occupied, or
under-construction property.

Equity
Stocks allow you to diversify through various financial instruments, with small
and big amounts and build a diversified portfolio. You can invest in various
companies, industry verticals, or equity instruments.

Impacted by market conditions

Real state
When you invest in the housing market, you depend on market conditions to
increase property value, rental yield, and rents to secure the best profits.

Equity
Equity Investment have high exposure to market volatility. It is suggested to
indulge in long-term stock investments for returns to accrue.

Additional Read: Investment Guidelines 2021-2022

Conclusion
Real estate serves as a secure investment option where prices remain stable
across periods. For better returns, a rental yield over 3% can be considered an
adequate yardstick. Similarly, if you are looking for capital appreciation, equity
investment can fetch you higher returns in 3-5 year periods. Besides, by
holding a portfolio of equity mutual funds, you can build a diversified portfolio
and minimise the risk of loss. 

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7/8/2021 As RBIs House Price Index growth continues to moderate, Equity markets surge - Tata Capital Blog

Investors should always opt for an asset class aligning with their financial goals,
suiting their risk appetite, and maximising their returns.

If you are looking to invest and grow your money, whether it is Real Estate or
Equity, turn to Tata Capital Wealth. Our experienced investment product
specialists and relationship managers provide research-driven market insights
and bespoke wealth management services. To know more, connect today!

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