Real estate investment- inflation protection for investors real estate sector market size

As the value of the savings reduces each year at a tremendous rate, the need to invest increases too.

Sep 08, 2021 07:09 IST India Infoline News Service

With the daily rise in inflation rate saving some money can be challenging. With the current inflation rate at 4.89% the ability to buy a number of goods at each currency unit reduces. As the years go by the value of money falls furthermore, so surviving in a world with just a paycheck without any investments is impossible as prices of goods keep on increasing at a massive rate.

As the value of the savings reduces each year at a tremendous rate, the need to invest increases too. The increase in cost of living reduces the amount of money one can save. We all want to secure our future to live comfortably and as we live in an expensive society; we always find ways to maximise the money we invest. We keep on looking for options that would multiply our wealth.

Keeping an eye on the options available in the market, real estate investment is the best way to protect its investors from inflation.

Outdo Inflation

Inflation in India has been increasing with a rapid speed but one thing that has always outdone the inflation mark is the real estate. The earnings from the real estate gives a massive amount of return to the investor even though we have to invest with a huge capital at the initial stage it has always been beneficial. The main reason why inflation does not affect real estate is as it depends more on geographical area than the actual market.

Flourishing Industry

Real Estate sector consists of 4 sub sectors – housing, hospitality, retail and commercial.

Investing in a housing sector can help you grow the initial investment into something sizeable down the line as property value increases even when there is a rise in inflation.

Hospitality industry benefits from the ability to daily change the price of the commodity as in to maintain profit margins despite the increasing costs making hotel investments a risk-adjusted hedge from inflation.

Retail Real Estate sector has gained PE (private equity) investments of $220 million in the year 2020.

Investing in a commercial real estate space, gives the investors to take the edge off the risks and take advantage of inflationary protections as the cost of material and labour wages increases it limits the supply and that causes the rental rates and property value to rise.

Real Estate is the sector that is recognised globally and has been growing significantly. As the demand for space and accommodation never stops so does the growth of Real Estate. The Retail  sector  ranks 2nd in creating employment.

With housing Sales reaching 2.61 lakhs in 2019 the real estate market is estimated to grow to $9.30 billion from $1.7 billion in 2019. The sector has attracted PE investments of $3241 billion in 2021.

The $200 billion real estate sector market size is expected to become $1 trillion by 2030. The other markets of hospitality, retail and commercial are also growing exceptionally and cater to the country's needs.

Protects the value of your money

Living in an environment where the level of prices relating to our everyday commodities is escalating faster than the interest rates on money this creates insecurity in one as their savings will worth less and less gradually resulting in a worse situation later on. Since in times like inflation, prices reach to a great height, we invest in various fields to get an affordable return to avoid inflation but if your saving, and investment does not grow at the same rate as the prices of good then it is a loss on your path. One needs to value the price of their money they input in an investment and real estate does just the thing. Investing in real estate also gives you a return of around 10% in a span of 10 years and the returns also depend on the investment you've made.

After being disturbed by the pandemic, the real estate sector is recovering rapidly. Now, when the markets are a bit down acquiring a property at a lower rate and investing in real estate is the best thing investors can do to save themselves from future inflation rates. Real estate is a tangible asset with much higher and promising returns.

The author of this article is Praveen Tiwari  Founder , Bizzcom Solutions

The views and opinions expressed are not of IIFL Securities,

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