Commit to savings through real estate
With real estate, you take a loan and commit yourself to paying an EMI to prevent yourself from spending your entire monthly income
Jan 09, 2014
Source : The Hindu

 

MUMBAI: Is real estate a good investment? Or is real estate good for you? The former focuses on returns from real estate, while the latter focuses on what real estate ownership can do to your emotional state of being. After observing the almost-compulsive urge among individuals to own a house, we realized that real estate ownership can do more good to your mental well-being than it can do to your portfolio.

Forced savings

Saving is difficult. Not because you do not earn enough, but because you have more opportunities today to spend your income. So, you should be motivated to save, or you have to force yourself to save for the future. If you are typical individual, you would force yourself to save, given the need for instant gratification.It turns out that real estate ownership helps you in forced savings. How?

Suppose social pressure and forceful nudges from your family drive you to buy a house. When you buy a house with a bank loan, you are committed to making a large payment (EMI) every month. Indeed, if you do not commit to such monthly payment, you may be otherwise tempted to spend that money on discretionary expenses such as fine dining and vacation.

In some ways, you could argue that real estate ownership is like a savings commitment device. Strictly, a commitment device is one where you lock yourself into a course of action that you may not otherwise choose, but which will help you over the longer term. Take your annual increment. Typically, an increase in income does not lead to proportionate increase in savings. And that is because you may consciously or otherwise increase your living expenses. You can, however, create a commitment device to forcefully increase your savings every year, by asking your employer today to take 15 per cent of your annual increment starting next year and investing the amount in your provident fund account.

Giving satisfaction

In the case of real estate, you take a loan and commit yourself to paying an EMI to prevent yourself from spending your entire monthly income. And EMI helps you in building your equity in the house. But why real estate, you may ask?

After all, a systematic investment plan on an equity mutual fund would qualify as a commitment device. And indeed, that would be our first choice. But what if you are not inclined to investing in equity funds?

After all, with the social and family pressure to own a house, you will be more predisposed to buying real estate than investing in equity funds. Besides, real estate ownership can create wealth and give you mental satisfaction.

Latest Realty News

Piramal PE closes Rs 1,000-cr realty fund
Jan 09, 2014
MUMBAI: The Piramals-backed private equity fund, focused on realty sector, today said it has finished raising a Rs 1,000-crore fund and has already committed Rs 250 crore from the corpus in three projects.
Office space absorption up 35%: Report
Jan 09, 2014
MUMBAI: The overall office space absorption in the top seven cities of the country grew by approximately 35 per cent in fourth quarter of this fiscal at nearly 8.2 million sq ft against six million sq ft in the previous quarter, according to real estate consultancy CBRE’s latest report.
New land acquisitions in Gujarat put on hold
Jan 09, 2014
GUJARAT: The Gujarat revenue department has issued orders to all district collectors, DDOs (district development officers) and all concerned district and state authorities to put on hold all processes for land acquisition till the Centre and the state government notify new rules and regulations under the newly enacted, ‘Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation And Resettlement Act-2013'. Land acquisition for Narmada canals and others, roads, public utilitie
Housing projects allowed in Gurgaon’s commercial zones
Jan 09, 2014
DELHI: In what will give a boost to construction activity in NCR, particularly Gurgaon, the Haryana government has decided to allow mixed land use in commercial zones notified in the master plan. The government’s move will allow realtors to build residential properties in commercial complexes.
Thaltej: Promising a bright future in Ahmedabad
Jan 09, 2014
AHMEDABAD: Since the last few years, Ahmedabad’s real estate market is growing at a very fast pace and new areas are being developed due to presence of good infrastructure projects and adequate basic facilities. Further, due to factors like urbanisation, Tier-II cities like Ahmedabad, have become major realty destination. The city is seeing numerous upcoming integrated township projects across the city and suburban areas. No wonder that these new projects have caught the fancy of the investors l
Pune looks forward to a giant leap in 2014
Jan 09, 2014
PUNE: It has indeed been an interesting year for Pune’s property market in 2013. At a time when the markets across the country were by and large subdued, Pune had been growing at a steady pace and even appeared on the luxury landscape during the year. There have been multiple demand drivers behind Pune’s growth during the year and it is generally believed that once the economic outlook in general is brighter, Pune may be witness to better appreciation than even the neighbouring Mumbai property m
Credai president ascertains all constructions follow guidelines
Jan 09, 2014
MARGAO: Goan and other investors should not harbour any undue apprehensions about the quality of construction projects in the state on account of the Canacona disaster, Jaganath 'Desh' Prabhudesai, president of the Goa unit of the Confederation of Real Estate Developers Association of India (Credai) said.
Haryana opens commercial zones for housing
Jan 09, 2014
GURGAON: In A move that is likely to impact construction in urban areas, particularly the NCR, the Haryana government has decided to grant mixed land use licences in commercial zones. The move will now allow developers to build residential properties in commercial complexes.
123 properties in prime locations in Delhi may go to Wakf Board
Jan 09, 2014
DELHI: The urban development ministry has prepared a draft cabinet note to denotify 123 properties in prime locations in Delhi, and to transfer the ownership rights to the Delhi Wakf Board in a way annulling their acquisition by the British government between 1911 and 1915.
76,000 govt properties encroached upon
Jan 09, 2014
NASHIK: 'Chavadi vachan' - the process of reading out records publicly at the village level - carried out by the district administration has revealed that 7,619 government properties were encroached upon by individuals and groups, against which, the administration has initiated action. The chavdi vachan programme has, in fact, helped the administration more than the people in general.

Latest Realty News Of State

Realty Talk's