Gold Versus Real Estate: Which One Is A Better Investment?

If you held 500 grams of gold back in 1997, when the price of the commodity was Rs 472.25 per gram, you would have safely been holding about Rs 2.36 lakh at that moment. In the same year, a Central government officer of the highest rank earned Rs 30,000 per month, revised and increased from Rs 9,000 per month in 1994. Therefore, holding gold was quite profitable.

In 2017, the value of gold is Rs 2,840 per gram. This means if you are holding 500 grams of gold today, it is Rs 14.20 lakh. However, considering the fluctuation in its value, most gold holders would know that in the past six months, the net change in value is minus 7.06 per cent.

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Compare this to land value.

If you had bought land in 1997 and built upon it, you would have secured the future of two of your children with the investment.

Sample this.

M Akram was lucky that he was allotted a 3BHK unit in 1982 in one of East Delhi's prominent residential pockets under the Delhi Development Authority's (DDA) initiative. Including the interest, he paid a total of Rs 80,000 for the property. Today, the property is worth over Rs 1.75 crore.

This is why we feel that real estate opens up as a wiser investment option.

Low volatility

Real estate is a stable investment. Unlike gold, it is something you really need. Among those who have owned a home and those who have lived on rent, tenants mostly crib about the amount of money they pour out as rents which they could have used as EMIs (equated monthly installment) . Although living on rent gives one the flexibility to be mobile without any strings attached, owning a house means you are ensuring a secure future. The price of gold often fluctuates. Hence, it is not as bankable as you may expect it to be.

Add value

Through renovation and repairs, the value of property can be increased. Unlike gold, property dimensions can be altered to suit your needs. Most owners over time renovate and build on their land for a higher value.

Also read: Real Estate Investment Mistakes You Should Avoid

Lease it out

Even if you aren't using your property, you will always find a willing taker if the location is good. Rental returns are a good way to earn. You can't lease gold. It is also easier to mortgage your property as collateral.

Secure it

Banks are not answerable for loss or destruction of your gold due to earthquake or theft, etc, while it is locked up in the bank locker. The same is not true of property.

Moreover, in the case of gold:

There are no tax benefits on holding gold.

The returns are cyclical. You may or may not be able to sell it at a cost you expect.

The liquidity is low.

The transparency is low.

Ease of selling varies from time to time.

There is no income potential.

It is also prone to manipulation. Those with a motive to suppress the value will often find a way to do so and thus, finding good buyers may be difficult.

When gold appreciates in value, it is mostly because of devaluation of paper currency. Hence, any gain is nominal.

Also, gold deposits over 500 grams, without a legit source of income, attract income tax under the gold monetisation scheme. The move has been strengthened after demonetisation. For a disciplined investor, equities have always been the top mode of investment. However, if high risk holds you back, real estate at the moment is very welcoming with choices and attractive payment plans.

Here's a guide to real estate investment in India.