Among Investors, Real Estate is frequently seen as a reliable asset. It is still regarded as being practically identical to a fixed deposit, despite the short – term difficulties brought on by the pandemic. A mutual fund investment, on the other hand, carries much greater risk. Mutual funds expose your money to the equity market, but there is a higher chance of volatility and financial loss.
Why Real Estate is Better than Mutual Funds ?
1)Tangible Asset – Real estate investing allows you to see, touch and experience your
asset’s growth. You can build it accordingly and relocate there. This mean regardless of
what happens , the investment will continue to have some inherent value. Whereas ,
mutual funds does not have any inherent value. Investing in mutual funds is buying share
of any non – physical corporation.
2) Risk Factor – Compared to mutual funds, real estate is a safer investment option. Since
mutual funds are correlated to the market, a decline in the value of the Sensex could
directly affect your mutual funds. Your fund could lose money if the Sensex falls
drastically since it could fall below the price at which it was purchased. On the other hand,
real estate investments wouldn’t result in such losses and you would be able to recoup your
initial investment with modest return.
3) Additional Income – Renting out a house is one of the major benefits of making an
investment in real estate. Rent is similar to an additional source of income that grows with
time. Whereas, the main benefit of investing in a mutual fund SIP is that it enables in
developing a regular saving habit.
Add on to the above point i.e., Additional Income, A person can buy a house and the rent
he gets from that house can be later invested in mutual funds in the form of SIP. By this
method he will be able to generate 2 income.
4) Leverage – This term in real estate is the use of borrowed funds or other financial tools to raise the possible profit on an investment. Using a loan or your income as a leverage is the easiest way in real estate. It is a financial strategy which help investors to boost their real estate worth.
There are many real estate leverage benefits that can help investors. For Example –
- You can grow your portfolio quicker
- Enhance Cash Flow
- Protection against inflation
5) Tax Benefit – Investing in real estate help you to save taxes and generate passive income.
- Income Tax Saving on Home Loan – Section 24, 80C, and 80EE of the Income Tax Act of 1961 provide tax benefits on home loans. You must meet one basic criteria that is the same for all income tax sections in order to obtain the tax benefit on a house loan. You must be the holder of both titles, i.e., the owner of the property and the person taking out the loan to purchase it. You cannot obtain these benefits by just being the owner or a borrower of funds.
- Amount of Income Tax deduction for payment of Housing loan Interest under section 24 – Before and after construction, you can deduct the interest you paid on your home loan from your taxes. Under this section 24 of the Income Tax act of 1961, a deduction for house loan interest can be made.
- Section 80EE of the Income Tax Act of India allows for the first – time homebuyer deduction. An additional tax benefit of Rs. 50,000 is given to an individual for home loan interest. The benefit of this deduction is provided in addition to the section 24 interest deduction. You must be purchasing your first home in order to qualify for these benefits, and the loan amount cannot exceed Rs 35 lakhs. Also, the property valuation should not exceed 50 lakhs.
- Income Tax Deduction for Principal amount of Home loan Repayment under Section 80C – You can claim a deduction for principal repayment once the construction of the property is done.
