By Rohan Patil
Is investing in real estate at a young age a good decision?
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.
As an investment
Even using the simple economic rule of demand and supply tells us how precious land is. The finite land resource will get dearer as the population increases. “Real estate is considered one of the safest 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.
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.
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.”
“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.
Things to keep in mind:
- 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.
– Anmol Gupta, financial planner, founder, 7 Prosper
Source: Times Property