A lot of experts advise investing in real estate as an important component of your asset allocation. But I am not really comfortable with this advice for the following reasons.
One, prices are already inflated with the amount of black money invested in this sector.
Two, the dealings in this industry is not really transparent and you are lucky to get a good deal without being an insider.
Three, the increase in value is notional, unless you get hold of another “bigger fool” to buy your real estate.
Four, you need a decent corpus to invest in real estate. Unlike the Rs 500 SIP that you need to invest in a Mutual Fund.
Deepak Parekh makes a few points in his interview in TOI today.
He says,
Basically, I feel the good old days of lowest interest rate are over. At the same time, I’m not concerned that they are going to double up or something. There will be a steady increase, but not a sharp increase. The trend is that interest rates would go up. Maybe, by another 50 basis points or so by December. Again, by another (50 basis points) in the next six months or so. It would have to balance growth and inflation.
Question: Coming to the realty sector, do you think affordable housing is going to be a reality in the country?
Deepak Parekh: Unfortunately for affordable housing, the bigger problems are in Delhi and Bombay. In these two cities land prices have shot through the roof. Unless the government is willing to give some land or develop some land for affordable housing, I don’t see how prices can come down significantly.
One of the complex things in India is to buy an apartment and not get cheated.
I’m sure a lot of you will disagree. I’m waiting to hear from you!
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