by Mr. Srinivasa Reddy,
Associate Director – Research,
Where should I invest my money – in a bank or in property,
business, gold, stocks or REITs? Many of us have asked that question of both
experts and ourselves. These kinds of questions do not seem to have an all-time
correct answer, nor do they have a universally correct answer.
India has one of the highest rates of household savings in the
world. Indian investors are quite conservative and cautious regarding their
capital protection. In addition, many individuals confuse a safe investment
with one that can provide a high level of return, and many investments are made
just to save income tax. About 30% of investments are channelled through
equities and other forms of financial investments, whereas 70% of investments
are in physical assets, gold and property.
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| Srinivasa Reddy, JLL India |
Looking at historical data on returns from various prevailing
investment options for 2005-13, Indian equity markets displayed greater
volatility compared with many other emerging markets. Despite markets
performing fairly well since 2009, investor participation in the equity market
is still very low, indicating a low appetite for this instrument, which is seen
as a high risk, high reward instrument.
Gold provides significant returns, but is a dead weight, as it
does not bring in a steady income. In addition, gold has lost its “safe haven”
appeal, as risk appetite has increased due to the improvement in the economic
outlook. The returns from fixed deposits in banks witnessed negative returns in
real terms for most years, due to inflation outstripping interest rates.
On the other hand, investments in residential property witnessed
stable returns since 2010, as shown in the table, and provided a steady cash
flow as well. However, residential property has a higher investment entry
barrier, so it is still an option only for relatively few Indians.
The Indian Government is formulating legislation for the
introduction of Real Estate Investment Trusts (REITs) in India. Some India based
REITs listed on the Singapore Stock Exchange have achieved annual returns
higher than average residential price appreciation. Once established in India,
REITs will attract small-sized investments, reduce individual speculation and
allow for more professional investment and management in the sector as well as
help to achieve greater cash flows in to the real estate sector, thus helping
the Indian economy to grow faster.
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But we are seeing advt. in newspapers in Delhi for commercial spaces, with assured returns along with good returns. So can you throw light on this.
ReplyDeleteHere in Delhi we we see advt. which show good returns on commercial properties with assured returns, can you throw light on this.
ReplyDelete