Investment Plans

Which Is Better for You: Real Estate Vs Sip?

By Admin
Mar 04, 2021
which is better for you real estate vs sip

Investing in real estate has become a popular investment option, thanks to the property being considered a solid asset. As it has the potential to grow exponentially over the years, real estate is an alluring option for many. Add to this the psychological sense of relief that comes with owning property and knowing that there’s a safety net, and it’s no secret why real estate is such a booming market in India.

On the other hand, investing in mutual funds through SIPs also delivers high returns over a similar period of time. SIP mutual funds are often considered to be a relatively safer option, when compared to debt mutual funds, since the investment is carried out via monthly premiums, rather than in the form of a lump sum in one go.

So, which one should you pick?

Through this article, let’s compare the two and learn about the returns you can expect from both over a period of time. The table below shows the differences between the two:

Factors

SIPS in Mutual Funds

Real Estate

Returns

They can give you high returns when you invest for a long period of time, as they are market-linked products.

The location of the property has a huge say in determining the returns that you can expect from this investment.

Diversification

You can choose from a variety of funds like debt funds, hybrid funds, equities, etc. when you invest in mutual funds through SIPs.

There is no option of diversifying your investment in real estate, apart from investing in residential and commercial properties.  

Taxation

Depending on the duration of the investment and the type of fund, LTCG and STCG tax is applicable to mutual funds.

Under capital gains law, earnings from land/property are taxable post indexation. If you are a first-time homeowner, you can also enjoy tax rebates up to INR 1 Lakh under Section 80EE. 

Liquidity

Liquidity options are available.

No liquidity options are available unless you sell the asset. However, you can earn monthly rent, which does bring a certain amount of liquidity to the table. 

Expenses

There are no extra charges or expenses, when it comes to investing in mutual funds through SIPs, even during the tenure.

You will have to pay for expenses such as stamp duty charges, mandatory registration costs, and expenses related to the maintenance of the property over time.

Frequency of Investment

You can make your investments in different ways, be it on a weekly, monthly, or quarterly basis. It basically depends on the type of plan you choose.

For a ready-to-move-in property, you can either make the whole payment in one go, out of your own pocket or use a home loan. In the case of an under-construction property, you can make the payments in instalments as well.

What returns can you expect to get by investing in real estate in different cities in India?

While picking the right investment avenue for your needs, it’s important to understand the returns you can get so that you can make an informed decision. The table below shows the different returns you can expect and the figures are based on the fact that the investment amount is INR 50 Lakhs.

City

ROI – 5 Years

5 Year Amount

ROI – 10 Years

10 Year Amount

Mumbai

12%

INR 88,11,709

15%

INR 2,02,27,789

Delhi-NCR

6%

INR 66,91,128

9%

INR 1,18,36,819

Kolkata

6.5%

INR 68,50,434

7%

INR 98,35,757

Bengaluru

7.3%

INR 71,11,622

10%

INR 1,29,68,713

Kochi

6.8%

INR69,47,464

8.5%

INR 1,13,04,918

What Returns can you expect to get by investing in a mutual fund through SIPs?

The following are the returns offered by some of the top mutual funds in India. The figures are based on the fact that your investment in a mutual fund is INR 50 Lakhs.

Mutual Funds

ROI – 5 Years

5 Year Amount

ROI – 10 Years

10 Year Amount

SBI Bluechip Fund

18.04%

INR 1,14,87,341

18.03%

INR 2,62,35,786

Mirae Asset India Equity Fund

20.62%

INR 1,27,34,627

16.55%

INR 2,31,25,58

Reliance Large Cap Fund

17.86%

INR 1,13,32,553

16.91%

INR 2,38,49,903

Aditya Birla Sun Life Advantage Fund

22.38%

INR 1,38,32,190

20.61%

INR 3,25,68,907

DSP BlackRock Opportunities Fund

19.66%

INR 1,22,81,725

18.83%

INR 2,80,69,261

Top Reasons to Invest in Real Estate

  • Rent it out: One of the biggest advantages of investing in property is that you can rent it out and get regular returns on a monthly basis.
  • Get a loan: You can easily get a loan against your property, which can prove to be handy in an emergency situation.
  • Enjoy great returns thanks to appreciation: If your property is at a prime location, then you should be able to enjoy a great ROI if and when you sell it after a few years.
  • Make smart investments easily – You do not have to be a savvy investor to make smart investments in the real estate market. By understanding a few basic factors such as the importance of location and emerging market trends (such as affordable housing), you should be able to make a smart investment in real estate.

Top reasons to invest in a SIP-based mutual fund

  • Create the habit of saving – Since you are bound to pay a certain premium on a regular basis, it helps you create the habit of saving. If you are not that good at it, you even have the option to start as low as INR 500 per month.
  • Achieve your financial goals – Mutual Funds through SIP can enable you to achieve both short-term and long-term goals. In fact, a lot of mutual funds are goal-oriented, which helps you keep track of the performance of the funds and plan your life’s milestones accordingly.
  • Enjoy easy liquidity – Thanks to the immense popularity of SIP mutual funds, you can easily sell them whenever you want and get the returns quickly. In most cases, you should be able to get the whole amount in a matter of 2 working days.

In conclusion, it’s important to note that investing in any of these two is a good option as both of them have their own advantages. However, if you are looking to gain higher returns on a regular basis, then SIPs are definitely the right option for you to choose. You can not only diversify your portfolio with them but also enjoy the returns as and when you like. Note that you should conduct a thorough comparison between different mutual fund options before finalising one. 

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