People would buy land / property / flat / real estate and sell or rent it for profit. Even after the banks and other investment avenues, most individuals still prefer to invest in property to earn a regular income and create wealth. You start earning rental income every month if you invest in a property and rent it out. After 10 or 15 years, the price would have increased when you sell the property, providing you a lump sum pay out. Today, loan accessibility and affordability have made owning property convenient for individuals. As a outcome, real estate is now an asset class for the masses, which used to be an asset class for the classes.

A bank mainly accepts deposits at a particular interest rate from its customers and provides loans at relatively higher rates to potential borrowers, earning them the margin. Bank does not invest its own money. It takes money from customers with fixed deposits and offers it to borrowers. Over time, fixed deposits became for many individuals a preferred investment choice as they were easy and the bank guaranteed returns. Fixed deposits provide you with the convenience of an assured return, but those yields are minimal and also generally fall below inflation rates.

There are few primary reasons why intelligent investors should avoid investing in flat / property:

   ♦ No Assured Returns: An unforeseeable property return (price). (The price will be decided by the buyer). Many individuals think there is always a increase in estate prices.
♦ Price will skyrocket or fall just because of the place of the property, building quality, which makes the property an unexpected asset class. There may be downs on the estate market. In 1995, prices in Mumbai, Hyderabad, Delhi and other towns were corrected for up to 45% for 10 years. It depends on a number of factors. If the markets are declining, then you may have to wait a little longer.
♦ An asset class under performance: most properties generate more or less the same returns over a period as Fixed Deposit.
♦ Most of the illiquid assets are property. Real Estate is the market of a buyer when you need money as a matter of urgency and finding a buyer is not simple. Usually an urgent sale gets much less than the asset’s true value. Price is negotiated with a lot of legal hassle like vegetable.
♦ It has hardly beat inflation
♦ Offer an annual rent between 2% to 3% of the total value of property – less than the returns on an FD and less than the EMI payments.
♦ 100% Occupancy is not ensured (by landlord).
♦ Investors who blindly believe in real estate tend to recognize only windfall gains stories
♦ Real Estate is a category of emotionally charged assets, as owners tend to connect properties to memories and feelings such as births, weddings, deaths, etc., which is why most investors forget about unnoticed return on investment.
♦ Investors may face endless litigation for many reasons, such as family conflicts, tenant encroachment or anti-social aspects, a government entity seeking property for a public project, government record ambiguity, etc.
♦ High maintenance efforts to maintain house in order. You have to pay taxes and utility bills, keep it in good condition, and also find fresh tenants when and when necessary. It needs time and energy at all times. Many people believe that investing in real estate is a lifelong expense.
♦ Property performance monitoring has many challenges. In Mutual Funds, you can monitor their output on a regular basis by clicking a button. But if you own 5 properties, can you check them physically every day?
♦ Alterations, Changes, value-addition does not produce returns, an investor may add equipment, interior decoration and gadgets to improve the experience of living in a property, but the next investor may want to customize the property differently and will therefore not be willing to compensate the seller for the additional investments made.
♦ Buyers and sellers often can’t agree on even Vaastu
♦ Even for small issues with society or neighbors, you can’t change home anytime. You can’t change your home anytime you want to move to another town for better employment. Even if you want to manage the traffic from one location to another, you can not change home at any moment. You can’t change your home anytime, even if you need a family from 2 BHK to 3 BHK etc.
♦ You can not change your flat at any moment, even if your tax benefits decreases, (like the principal’s 80C and interest’s 24(b).) You can’t change home whenever a new cosmopolitan area comes in the town that’s better than where you’re staying now. If you move out of town, it’s a issue to find a tenant. A tenant who can turn your dream home into a dirty home, and so on.