Where Should You Invest: Real Estate Or Stock Market?

The debate over whether investors should put their money in real estate or the stock market has been going on for long. And, it is expected that this debate would mellow down after Real Estate Investment Trusts or REITs -- which can be publicly traded, even on the internet -- come into being in India.

Here we present the two sides of investing in property in India and in stocks. This discussion assumes that the investor is looking at real estate merely for investment purpose and not looking it as a home in any residential projects in India.

1. Size of returns

Let's compare. You had invested substantially in a stock when it was trading at a low price and it turned out to be a blockbuster hit as the stocks zoomed past expectations. Juxtapose the same scenario to real estate. Even if the percentage of returns is equal, the size of profit made in real estate and stocks are incomparable! Even the riskiest investors put in only a few lakhs of rupees in stocks, but in real estate, the size of investment is in multiples of stocks investments, making the profit pie that much larger. We are talking in crores. Thumbs up to real estate!

2. Dividends/notional returns

If you are expecting returns on a regular basis, then stocks might be the right option for investment. If you invest in the right stocks, reputed ones always give dividends to the investors. Dividends, however, are not necessarily an annual affair and there are many top stocks which do not give dividends for years. Real estate investments, on the other hand, demonstrate a notional value increase. Neither of them lays eggs every day!

3. Risk level

Real estate investments or buying under construction properties in India might not grow exponentially or go as high as expected, but only in rare cases does it depreciate. Stocks, however, are opposite in terms of risk. There is every chance that the value of your investments in stocks can go down to half its value. And, this is a very common occurrence. Stock portfolio requires regular research and buying and selling. Stocks are riskier.

4. Liquidity

Stocks are much more liquid than any other form of investments, even fixed deposits. However, there is no assurance of the value that one can get from stocks. Getting money out of real estate investments is just as tough as buying a property. It is extremely time consuming and also expensive. Neither of them is a good way to save for emergencies.

5. Time consumed

It would require at least a year of research, chasing agents and loan approval before making an investment in real estate. You can make an investment in stocks by simply clicking a button. After the investment, however, one can simply sit and wait for a real estate property to appreciate. There is no such advantage for stocks. You will have to regularly, i,e, daily or even hourly, check the value of your portfolio, follow economic updates and make astute decisions. That is how you keep your stock portfolio going. A few years of work for real estate versus lifetime attention to stocks!

(The writer has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)