Real Estate Vs Stock Investment | Stocks and Commodities

Real Estate Vs Stock Investment:

1. Earlier I have written two articles regarding Real Estate investment.
2. Recently one of the blog reader wanted to know whether it is better to invest in an apartment or shares now.
3. I replied him by saying that one can not give answer straight away, it depends on many factors.
4. Every one need a house to live.
5. So if you do not have a house already, it is better to invest in a house.
6. Forget about capital appreciation, your first house is a consumable.
7. We discuss here assuming that this person is talking about investments.
8. Since majority of blog readers are tamilians, we restrict ourselves to Tamil Nadu real estate.
9. Buying a plot is ruled out as the prices have already hit the roof and further possibility of capital appreciation is very very low.
10. More over, after the recent floods in Chennai, most people avoid buying plots in the outer areas.
11. Just imagine, in 2004, one ground plot in Valasaravakkam was Rs 4 lakhs and now right in the middle of a lake in Mudichur, it is Rs 50 lakhs.
12. In the last 10 years, prices have appreciated by 100 times and how far that can continue?
13. So when it comes to real estate, investment in an apartment is better as you will get some rental return.
14. As I have said earlier, about 10 years before, buying an apartment is easy, in addition to the price you pay registration charges and a little bit for EB charges.
15. Now you pay (i) Preference location charges, (ii) Floor rise charges, (iii) Car Park Charges, (iv) Service Tax, (v) VAT, (vi) Infrastructure Development Fee (vii) Club house charges, (viii) Registration charges (ix) EB charges, (x) Sewage charges, etc
16. When you buy a product, you pay excise duty indirectly or when you buy a service, you pay Service Tax, you pay only one tax.
17. But in buying an apartment, you pay registration charge as well as VAT and Service TAx which amounts to double taxation.
18. Now the discussion is going on whether GST, as and when it is implimented, should be levied on an apartment or not.
19. Otherwise, you end up paying about 30% to 35% of the apartment price as other charges.
20. Do you know that is is just 1% to 4% in most countries.
21. I bought an apartment in Singapore at Rs 1 Crore and my other charges was just Rs 2 Lakh, it is just 2%.
22. One of my friends has an apartment on 17th floor in a project on OMR and the lift was not working for more than a month during November - December 2015. Imagine the life.
23. Another friend bought an apartment in OMR by a National reputed builder, he paid about Rs 50 lakhs from his pocket and paid about Rs 10 lakhs towards the interest to bank, so his cost works out to be Rs 60 lakhs.
24. He was handed over the apartment only last year, though he booked in 2008, and he is in financial distress, want to sell.
25. When he approached the builder to take back the apartment, builder said he will give Rs 21 lakhs and that too after he sell the apartment.
26. Such is the situation in OMR now. This has happened efore flooding, now imagine what will be the situation.
27. Getting tenant for rental is also very difficult.
28. So if at all you want to buy apartment, buy in the city area, avoid outlying areas.
29. If you have some knowledge and some risk taking abilities, surely you can make better money from markets.
30. Take for example, NMDC, the price has come down from Rs 500 to Rs 75, it offers 11% dividend yield, that too tax free.
31. If you know how to hedge the folio, you can get some more money.
32. An asset which has come down from Rs 500 to Rs 50 which you want to buy or another asset class which has gone up from Rs 50000 to Rs 50 lakh which you want to buy?
33. If you buy an apartment, you can just forget it.
34. But share investment, you need to constantly monitor.
35. If anybody follow my blog, one can make 20% to 25% return easily. But that kind of return is just not possible in real estate now as prices have already gone up.
36. So my verdict is "If you want passive investment and less return, go for an apartment in city area but if you want active investment and more return then come to stock market"