Real estate is often considered as a solid asset among investors. It comes with less risk and provides a good rate of return in comparison to other asset classes. Also, it feels good to have a property in your name in a prime city like Mumbai. One distinguishing feature about real estate is the potential for growth. Across the years, property which was purchased in 2000 for ₹15 lakhs has grown over 5x and stands at ₹75 lakhs. It is true that property rates across Mumbai have grown significantly, but have they grown more than SIPs? Let’s find out.
| Criteria | SIPs in Mutual Funds | Real Estate |
|---|---|---|
| Returns | Mutual funds are market linked products and yield high returns over a long time period. | Returns from investment in real estate may not yield high returns if the property is located in a non-prime area. |
| Diversification | SIP investment in mutual funds are diversified across various assets such as equities, debt and hybrid funds. | You cannot diversify a property investment. |
| Taxation | Mutual funds are subject to LTCG and STCG tax depending on the type of fund and duration of investment. | Earnings from a property are taxable under capital gains section post indexation. |
| Liquidity | Yes | No |
| Expenses | None on/during investment. | Mandatory registration, stamp duty charges and annual maintenance charges |
| Mode of Investment | Systematic Investment which can be weekly, monthly, quarterly basis. | Either a one-time complete down payment from own money or via Home Loan for ready to move property. The payments can be installments for under construction property. |
The best way to look into this is by comparing examples.
If you invest ₹50,00,000 in a property across the following metro cities, your returns would be:
| City | ROI - 5 years | 5 Year Amount | ROI - 10 years | 10 Year Amount |
|---|---|---|---|---|
| Mumbai | 12% | ₹88,11,709 | 15% | ₹2,02,27,789 |
| New Delhi/NCR | 6% | ₹66,91,128 | 9% | ₹1,18,36,819 |
| Kolkata | 6.5% | ₹68,50,434 | 7% | ₹98,35,757 |
| Bengaluru | 7.3% | ₹71,11,622 | 10% | ₹1,29,68,713 |
| Kochi | 6.8% | ₹69,47,464 | 8.5% | ₹1,13,04,918 |
If you invest ₹50,00,000 in mutual funds, your returns would be:
| City | ROI - 5 years | 5 Year Amount | ROI - 10 years | 10 Year Amount |
|---|---|---|---|---|
| SBI Bluechip Fund | 18.04% | ₹1,14,87,341 | 18.03% | ₹2,62,35,786 |
| Mirae Asset India Equity Fund | 20.62% | ₹1,27,34,627 | 16.55% | ₹2,31,25,58 |
| Reliance Large Cap Fund | 17.86% | ₹1,13,32,553 | 16.91% | ₹2,38,49,903 |
| Aditya Birla Sun Life Advantage Fund | 22.38% | ₹1,38,32,190 | 20.61% | ₹3,25,68,907 |
| DSP BlackRock Opportunities Fund | 19.66% | ₹1,22,81,725 | 18.83% | ₹2,80,69,261 |
From the above comparison, we can conclude that returns from investing in SIP mutual funds are better than returns from real estate.
One of the biggest advantages of investing in a property is that you can rent it out. Rent is like an additional income which increases over a period of time.
You can take a loan against your property in case of a financial emergency.
Purchasing a property on a prime location can be of a great advantage. Being in a prime location, the real estate prices can skyrocket in the near future. Once it appreciates, you can sell it off for a handsome amount.
The primary purpose of investing in a Mutual Fund SIP is that it helps you build and cultivate a regular habit of savings. You can begin with a minimum amount of ₹500 per month.
Mutual SIPs can help you achieve your long term as well as short term goals. The entire process of Mutual Fund SIPs is highly goal oriented and keeps your investments on tack.
Due to the popularity of SIP investments, you can easily sell the mutual fund. The entire amount is credited to your account within 2 working days.
Is property investment a good idea?
Yes, investing in real estate is a great idea if you are looking to stay at a particular city for over 20+ years. It will also save you from the burden to pay the rent.
Which is the best SIP for a 3 year investment?
All Equity Linked Savings Scheme are an excellent investment option for a 3 year time period. Also, you are entitled to tax benefits under Sec 80C of the Income Tax Act, 1961.
Is it worth it to invest in SIPs
Yes SIP is an Systematic investment plan which is beneficial for the person who looking for the long period of time of investment. It is wrathful to investment through SIP.
