Obsession with buying a house: Why do Indians prefer real estate?

Raghvendra Nath, MD, Ladderup Wealth management

Most people fancy buying real estate as it is a real asset and not just a paper. Also, they believe in the long term, most real estate prices would appreciate; so the chances of loss are negligible. In India, buying a home is one of the top priorities for people. The outlook for the real estate sector continues to be quite pessimistic especially for the next 4-5 years. The demand is negligible, the price levels are still elevated resulting in tepid end-user demand. Most builders are in financial stress with large unsold inventories. In such a scenario, investing in real estate could be a high-risk proposition.

For most investors who have moderate levels of wealth, let’s say less than ₹ 10 crore, the only real estate that we recommend is their residential home. For rich investors, the recommendation is to keep only 30-35% in real estate assets. Because, if you have limited wealth, you need to have liquid investments so that you can utilize your wealth when you need it. Also, real estate investments are done in chunks and one bad investment can permanently drag the returns of the entire portfolio.

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