Real Estate Investment: Inflation Protection for Investors

With the daily rise in inflation rate, saving some money can be challenging. With the current inflation rate at 4.89 per cent, 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 pay-check without any investments is impossible as prices of goods keep 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 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 at a rapid pace but one thing that has always outdone the inflation mark is real estate. The earnings from real estate give a massive amount of return to the investor, even though we have to invest with a huge capital at the initial stage. The main reason why inflation does not affect real estate is because it depends more on geographical area than the actual market.

Flourishing Industry

The real estate sector consists of four 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 has gained PE (private equity) investments of $220 million in the year 2020.

Investing in a commercial real estate space takes the edge off risks, and takes 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 creates insecurity as savings gradually start to be worth less and less, resulting in a worse situation later on. Since in times of inflation, prices reach to a great height, we invest in various fields to get an affordable return to avoid inflation. However, if your savings and investments do not grow at the same rate as the prices of goods, then it is a major loss on your part. One needs to value the price of the money they invest, and real estate does just the thing. Investing in real estate also gives you a return of around 10 per cent in a span of 10 years and the returns also depend on the investments you have 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 is Founder, Bizzcom Solutions

DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.