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Investment in Real Estate vs SIP

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.

Difference Between Investment in Real Estate vs SIP in Mutual Funds

CriteriaSIPs in Mutual FundsReal Estate
ReturnsMutual 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.
DiversificationSIP investment in mutual funds are diversified across various assets such as equities, debt and hybrid funds. You cannot diversify a property investment.
TaxationMutual 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.
LiquidityYesNo
ExpensesNone on/during investment.Mandatory registration, stamp duty charges and annual maintenance charges
Mode of InvestmentSystematic 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.

Returns in Real Estate vs Mutual Fund SIP

The best way to look into this is by comparing examples.

Returns from investing in Real Estate

If you invest ₹50,00,000 in a property across the following metro cities, your returns would be:

CityROI - 5 years5 Year Amount ROI - 10 years10 Year Amount
Mumbai12%₹88,11,70915%₹2,02,27,789
New Delhi/NCR6%₹66,91,1289%₹1,18,36,819
Kolkata6.5%₹68,50,4347%₹98,35,757
Bengaluru7.3%₹71,11,62210%₹1,29,68,713
Kochi6.8%₹69,47,4648.5%₹1,13,04,918

Returns from investing in a mutual fund through SIPs

If you invest ₹50,00,000 in mutual funds, your returns would be:

CityROI - 5 years5 Year Amount ROI - 10 years10 Year Amount
SBI Bluechip Fund18.04%₹1,14,87,34118.03%₹2,62,35,786
Mirae Asset India Equity Fund20.62%₹1,27,34,62716.55%₹2,31,25,58
Reliance Large Cap Fund17.86%₹1,13,32,55316.91%₹2,38,49,903
Aditya Birla Sun Life Advantage Fund22.38%₹1,38,32,19020.61%₹3,25,68,907
DSP BlackRock Opportunities Fund19.66%₹1,22,81,72518.83%₹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.

Why invest in Real Estate?

Additional Income

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.

Loan

You can take a loan against your property in case of a financial emergency.

Appreciation

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.

Why Invest in a Mutual Fund through SIP?

Savings

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.

Goals

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.

Liquidity

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.

FAQs on Investment in Real Estate vs SIP

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.

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