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Real estate is the most important asset class in the world. Period.
Here’s a statistic that may surprise you:
Globally, real estate has been valued at over $280 trillion — a more valuable asset class than
all worldwide stocks and securitized debt combined
and represents
the largest store of wealth
at 3.5x the total global GDP.
Whether you’re planning to buy a home, rent an office, sell your property or broadly want to invest in real estate – you name it – these infrequent decisions have a lasting impact on your life.
We see a deluge of knowledge shared when it comes to the stock market (a smaller asset class). However, there is an enormous drought in the world of real estate. This mismatch in knowledge to impact is startling for me.
I’ve been fortunate to have had the unique experience of leading companies across the real estate stack – from mortgages to development, I’ve done it all. My hope is that through this weekly newsletter, I can help you confidently handle your dealings in real estate.
This introductory edition will help you understand the sheer importance of real estate and home buying in the context of your financial future.
- Your home could be your most valuable asset
According to Hurun India, families with savings of Rs. 20 lakhs per annum represent the “new middle class”. For this family category, nearly half their wealth is represented by the value of the home they live in.
Let’s dwell on this a little. One purchase decision represents half their net worth – it’s mind-boggling how little they know about home buying when the said decision is made. Most local brokers lack the fundamental knowledge to help you and some developers may not be forthcoming about a lot of crucial details.
With property prices skyrocketing and home construction taking place at an unprecedented pace, a single decision in this sector can have a material impact on your financial profile.
While it is deep-rooted in Indian culture for a family to buy a home of their own, residential home buyers and property investors make fundamentally poor decisions all the time that negatively impacts their livelihood.
- It’s easy to make mistakes and get stuck
Empty buildings and partially constructed projects in our rapidly expanding cities may sometimes give you a sense of there being excess inventory in real estate. However, when you want to buy a house or buy an office, you will feel like everything that’s meeting your expectations has already been sold. This ironic situation best describes why some people make hefty sums while others lose their life savings with real estate decisions.
- The apartment has a swimming pool – but how far away is it from hospitals, schools and fuel stations?
- What does the RERA website say about the developer?
- What is the legal opinion on the sale deed?
- Should you buy while construction is in progress or after?
These are some basic fundamental pieces of information you need regardless of whether you are buying real estate for personal use or as an investor. Real estate is a notorious sector, and diligence on your end needs to be thorough.
- Real estate is a stable, high-performing investment
Around 1.56 lakh crore homes were sold during H1 2022 in the top 7 Indian cities, which is almost double the corresponding half last year which saw 72,000 homes being sold under the same criteria. As an investor, ignoring this massive and rapidly growing sector would be foolish.
I have nothing against the stock market, but the amount of focus this investment class receives relative to others gets me worried for the average investor. You see, trading stocks, while thrilling, gives a false sense of control. While you can see stock prices on a whim and trade with a click of a button, they are unreliable and volatile.
Really rich people realize this and have a huge chunk of investments dedicated to real estate – a stable asset class with the potential for outsized returns. If investments are done with the right amount of diligence, not only will you see substantial capital appreciation, but also passive income in the form of rent.
In fact, several derivative investments like REITs (Real Estate Investment Trusts) are becoming a popular way to get the liquidity of the stock market combined with the investment profile of real estate. I will dedicate a newsletter to this topic in the coming weeks.
The potential for real estate to have a real impact on your life is enormous. It’s a fascinating sector that has given me so much in my professional career. Whether you’re a buyer, seller, investor, student, broker, developer, financier, or channel partner – I hope through each of the following editions of Open House, I bridge the knowledge gap for you on the largest and smallest topics that matter.
Feel free to email me about what you’d like me to cover in Open House. I’d love to hear from you all 😊
Keep fighting the good fight, see you next week!
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