Investing in gold or real estate in India in 2025? Compare tax benefits, liquidity and returns to decide | Mint

Investors in India are exploring smart strategies to build wealth. Two prominent options are investing in gold or taking a home loan to invest in real estate. Both approaches offer their own set of advantages and disadvantages.

According to Atul Monga, CEO and Co-founder of BASIC Home Loan, “The decision to invest in gold or purchase a home should be based on one’s financial goals, liquidity needs, and investment horizon.”

“Gold has surged to record highs, driven by global economic uncertainties and rising demand for safer investment options. For many Indians, gold is a crucial asset that acts as a reliable hedge against inflation. Moreover, the accessibility of digital gold & gold ETFs has further democratised this asset class.

“Real estate, on the other hand, offers long-term capital appreciation and rental income benefits. While the initial investment in real estate can be substantially higher than investing in gold, it is a tangible asset that can be used as a financial investment and a practical utility. Ultimately, the best investment strategy is the one that aligns with an individual’s overall financial goals and risk tolerance,” he added.

Let us hence discuss five key factors to help you in deciding wisely:

1. Investment horizon

Gold is generally ideal for your short term goals. It acts as a hedge against inflation and is more liquid than real estate in nature. Options such as Sovereign Gold Bonds (SGBs) can provide capital appreciation with the added benefit of annual interest.

Home loans on the other hand provide for support in the long run. Real estate can provide rental income and appreciation in the long term. According to RBI guidelines home loans are available on favourable terms through various financial institutions.

These loans are provided in the range of ₹10 lakhs to 25 lakhs or even higher by leading financial institutions, banks and NBFCS, depending on the creditworthiness, credit score, repayment capacity and past history of the borrower and his potential to convince the lender of the same. For complete clarity on this, consider reaching out to your respective lender.

2. Liquidity and flexibility

Gold is easy to buy, trade, or sell, so it is a clear winner in this department when compared with real estate, especially with digital gold and SGBs listed on stock exchanges.

Property, though lucrative, lacks easy selling ability and liquidity. Selling of property units generally takes time, and it comes with higher transaction costs and associated complications. RBI also follows a strict Loan to value ratio (LTV) to ensure borrower equity.

3. Affordability and scalability

Gold is an investment idea that is both scalable and affordable. You can begin with just a gram in SGBs, thus making it fairly suitable for small and medium-level investors.

Home loans on the other hand need a larger upfront investment, sincere commitment, down payment, registration, EMIs etc., and are considered best for those with long term financial stability.

4. Tax benefits and implications

Home loans provide for significant tax deductions under Section 80c on principal and Section 24(b) on interest. Gold, while reasonably profitable, lacks such deductions. Still, capital gains on SGBs are tax-exempt on redemption for individual investors.

5. Returns and growth potential

Therefore, on a balanced level, gold has delivered solid returns and still remains a reliable protection, i.e., a hedge against inflation. SGBs offer extra interest income, boosting the total yield.

Real estate on its part can provide for rental income, capital growth in the long run and now a broader access through REITs, thanks to SEBI’s investor friendly changes and reforms.

Conclusion

Gold is a strong contender for short-term liquidity and inflation protection. Home loan-backed real estate is better for long-term wealth and income. A diversified investment strategy combining both can offer stability and growth.

Hence, to conclude, gold can be a better choice for short-term liquidity and inflation protection. For long-term wealth, income generation, and rental yield, home loan-backed real estate can be a viable option. A strategically diversified investment strategy that combines both can offer stability and growth simultaneously.

For complete clarity on the same, it will be prudent for you to consult a certified financial advisor and take any investment decision only after considering factors such as proper research, individual financial capacity, credit worthiness, credit scores, EMI repayment potential, current financial health, pros and cons of both investment ideas among other associated issues.

Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Readers are advised to consult a certified financial advisor before making any investment decisions.