In India, real estate is often considered a prime investment opportunity, yet Chennai-based wealth advisor and value investor Anand Srinivasan argues that the country's obsession with real estate is economically misguided, dubbing it "The Great Indian Real Estate Delusion." In a LinkedIn post, he points out that while property values are expected to rise, rental income remains disproportionately low.
Srinivasan writes, "Rental yields in India are just 2-3% annually, which is even lower than a basic savings account. Globally, returns are around 5-6%. At this rate, recovering your investment purely from rent could take 35 to 50 years. Still, most Indians invest in residential property solely on the hope of price appreciation.
Srinivasan explains that this is becoming an increasingly risky gamble. During the 2000s, prices surged, but many markets have since plateaued or declined when adjusted for inflation. Market inflation is not the only risk—high transaction costs, including stamp duty, brokerage, and registration, can consume 6-10% of property value right off the top. Additionally, real estate's notorious illiquidity means selling a property might take months or even years.
Srinivasan warns, "With millions or even billions locked in a single asset, a local market crash can decimate your wealth." So why do Indians continue to pour money into high-risk, low-return assets? He explains, "Cultural conditioning, tax breaks, opportunities to park black money, and the pervasive fear of missing out drive this trend."
Srinivasan's advice is straightforward: If rental yields don't justify property prices, reconsider your investment. "Counting on price appreciation is merely a hope, not a guarantee.
