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Real Estate Vs Stock Market in India

There are quite a few differences between real estate and stock market investments.

The salient features of real estate investment are as follows:

  • A long term investment that you need to hold till the market price rises to its potential.
  • Time consuming as it requires thorough research for making the right choice, followed by legal paperwork to complete the process.
  • Exposed to market risks, but holding it till the market prices rise, thereby generating high returns.
  • You have to wait for the right market conditions, find the best buyer and sell the property to liquidate your investment.
  • No option for diversification.

Salient features of stock investments are:

  • It is a long term investment though may not be as long as real estate investment.
  • All you need so as to invest in stocks is to find a reliable stock broker, open demat & trading account, link it to your bank account - all of which can be done online.
  • Exposed to market volatility, but usually generates higher returns over long term than real estate. However, misleading market trends often make investors take impulsive buying and selling decisions.
  • You can exit your stock investments anytime during market hours. You can also liquidate your equity investments partially to meet your needs.
  • You can diversify your investments with a nominal amount and also invest in equities and stocks of various companies.

Difference Between Investments in Real Estate Vs Stock Market in India

ParametersReal Estate in IndiaStock Market in India
Long term investmentA long term investment that you need to hold till the market price rises to its potential.It is a long term investment though maybe not as long as real estate investment.
Ease of investmentTime consuming as it requires thorough research for making the right choice, followed by legal paperwork to complete the process.All you need to invest in stocks is to find a reliable stock broker, open demat & trading account, link it to your bank account - all of which can be done online.
Market conditions Exposed to market risks, but holding it till the market prices rise generates high returns.Exposed to market volatility, but usually generates higher returns over the long term than real estate. However, misleading market trends often make investors take impulsive buying and selling decisions.
LiquidityYou have to wait for the right market conditions, find the best buyer and sell the property to liquidate your investment.You can exit your stock investments anytime during market hours. You can also liquidate your equity investments partially to meet your needs.
Portfolio diversificationNo option for diversification.You can diversify your investments with a nominal amount and also invest in equities and stocks of various companies.

Returns in Real Estate Vs Stock Market in India

Returns from Real Estate

  • Real estate yields cannot usually beat inflation.
  • Returns from real estate are primarily decided on the basis of its location. Market prices often fluctuate, making it challenging to estimate the returns.
  • Real estate investments for the purpose of living in it cannot be considered as an investment because it would not generate monetary returns.
  • Real estate investment is more expensive than stocks, since it requires a substantial lump sum payment as an initial investment.
  • Recommendable for investors who want to invest a substantial capital.

Returns from Stock Market

  • With stock investments, individuals invest towards the ownership of the company. Therefore, when the company makes a profit, it is automatically passed on to the stockholders as well.
  • Investors are eligible for dividends on shares.
  • Selling them at the right time also generates healthy returns.

Why Invest in Real Estate in India?

  • For real estate investments, you need to get your timing right – timing of its purchase and its sale. Invest in one when the market prices are low or on the verge of increasing or show great scope for the same. You can sell it when the prices have skyrocketed, enabling you to enjoy high returns on your investment.
  • You also have to wait for the right market conditions, look for a good and genuine buyer and sell it to liquidate your real estate investment.

Why Invest in Stock Market in India?

  • Investing in the stocks of a growing or renowned company implies that the stock owners will also share the profits.
  • Apart from offering dividends on shares, selling them enables the shareholders to make further profits on selling them.
  • Serves as a potential source of income.

FAQs on Real Estate Vs Stock Market in India

How do I start investing in real estate with little money?

Investment in real estate requires large sums of money. However, you can invest in mutual fund schemes of real estate companies with a small amount.

How much money do I need to start stock trading?

There is no minimum limit on the amount with which you can start investing in stocks. However, there are a couple of thumb rules that you must follow. Also, if you are young, consider investing 80% of your entire net worth in stocks.

Is buying a house the best investment?

Investment decisions vary between individuals because all of us have different financial objectives. Hence, what might be a good investment for you might not be the same for another person. The following are the pros and cons of investing in real estate:

  • Reselling a property when the market rate for the specific location is high makes it a great investment choice.
  • Offering a real estate property on rent acts as a stable and reliable source of income.
  • Real estate yields generally cannot beat inflation.
  • Location is one of the primary parameters that determine the returns that you will enjoy from your real estate investment in the future. Since market rates fluctuate often, it becomes difficult for investors to predict the returns.
  • Purchasing property for the purpose of living in it cannot be considered as a financial investment as you would not enjoy monetary returns from it.
  • Real estate investment requires a lump sum payment at the time of purchase. Therefore, you either need to take a loan or build a corpus for it well in advance.

Is investing in stock worth it?

Here are some reasons why you should consider stock trading:

  • Investing in the stocks of a growing or renowned company implies that the stock owners will also have a share in the profits.
  • Apart from offering dividends on shares, selling them enables the shareholders to make further profits.
  • Serves as a potential source of income.

What can you invest in besides stock and real estate?

There are a wide range of investment options available. You can invest in them as per your risk retention capacity and investment objectives.

What is average return on rental property?

Returns on real estate investment are much lower in India as opposed to global standards. According to 2014 records, returns were recorded at 2%.

What is a better investment- stocks or bonds?

A robust investment strategy ideally comprises of a mix of stocks and bonds, as per your unique investment objective, risk appetite and age, you can make a choice.

What is the average rate of return on real estate investments?

Average rate of returns on real estate investments are much lower in India as compared to global standards. As per 2014 records, returns were recorded at 2%.

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