After the global pandemic hit every country in the world, the economic downturn inevitably damaged all the markets. Now that all economies are heading towards slow and steady improvement, we can see a consistent rise in prices. With greater demands, the prices are increasing naturally– causing a massive rise in inflation.
In this article, Agency21 International will be highlighting numerous real estate benefits. As you read on, you will gain a better understanding of the advantages real estate has over other investing possibilities.
Current Situation in Pakistan
Inflation has been at an all-time high in Pakistan since the political turmoil took over. Mian Muhammad Mansha, one of Pakistan’s most influential businessmen, stated that the problems Pakistan’s economy is facing can be resolved through Foreign Direct Investment (FDI). This will increase the foreign reserves in the country, thus promoting economic growth.
The inflation rate in the country is increasing every week, reaching an all-time high of PKR 200.20. For this reason, people are taking out their money from financial institutions and investing in real estate. After all, it is evident that real estate acts as a hedge against inflation when the Rupee is devaluing constantly. There are numerous real estate benefits we will be listed ahead.
How Do Real Estate Investments Work?
The real estate market is valued at around $300 billion to $400 billion. The construction output produced in the real estate industry is worth 2% of Pakistan’s total Gross Domestic Product (GDP), and according to the World Bank, the real estate assets account for up to 60% to 70% of the country’s total wealth.
There lies a lot of potential in the real estate sector of Pakistan, as it is growing at a constant pace. Real estate is one of the safest and non-volatile options to invest in Pakistan. With significant investment, one can earn tremendous returns, tax savings, consistent cash flow, and a slew of other perks.
Income coming through property rent, appreciation, and earnings from property businesses are some significant ways to make money in real estate investing.
Passive income, diversification, consistent cash flow, tax savings, and leverage are all advantages of investing in real estate.
What Are The Advantages Of Real Estate Investing?
Here we are going to list down some real estate investments you need to do!
Stable Cash Inflows
Real Estate enables you to earn a good return on investment. However, it is important to note that real estate does not offer short-term or quick returns. You have to wait for a long while to receive what you have invested earlier and more (in the form of profits).
Especially if you are retired, real estate investments can benefit you abundantly. Life-long savings need to be invested in a place that is unaffected by currency devaluation, inflation, and other economic factors. Real estate will only give you higher returns during any economic downturn.
When you invest in real estate, you can save yourself from paying high taxes. A huge number of deductions can save you from spending a huge amount of money.
It is evident that a property’s financial value can only increase with time, even if the physical worth of the house depreciates. Furthermore, because the cost of purchasing and developing an investment property can be depreciated throughout its useful life- e.g. 27.5 years for residential properties- you can take advantage of massive deductions to reduce your taxable income.
The GDP growth of an economy and real estate investments go together. There are a number of ways in which real estate acts as a hedge against inflation. To begin with, property values may rise faster than inflation, resulting in increased cash flows and thus a high return on investments.
Moreover, property rents may rise in line with inflation as well, therefore, purchasing a property with the intention of selling it out is a good idea.
Real estate investments might also help you earn money in the long run. You will be able to obtain a steady stream of income from renters if you acquire a house and rent it out. This will not only protect you against inflation, but it will also allow you to profit from it. Higher rental revenue enhances the property value during periods of rising inflation.
One of the most important concepts in financial management is to not keep all the eggs in one basket. Yes, this means that diversification of your portfolio is highly important because it spreads out all risk.
However, this does not necessarily mean that you need to invest in different places to spread out your portfolio. People also commonly invest solely in real estate to spread out their financial risk. It is for sure that real estate investments are one of the safest ones.
The real estate industry is also regarded as being an originator in providing jobs to a large number of individuals. Multiple processes are involved in real estate including construction, architecture, engineering, marketing, sales, etc. all of which contribute to professional opportunities. These work opportunities have the potential to resolve a variety of unemployment-related issues.
The appreciation of property value is commonly found in real estate investments. With time, rental payments are also likely to increase, enabling the priority goal of the investor– a higher return on investment.
The Bottom Line
Keeping in mind the economic situation in Pakistan, it is important to note that the ideal time to purchase a property is now! With the prevailing situation of inflation and rising prices, one can only benefit from real estate investments.
Furthermore, one should also consider the downsides of putting their money in real estate. The main problem with it is liquidity– it will be difficult to turn the asset into cash if it’s needed urgently. Property transactions take a long while if we compare them to investments in stocks and bonds.
All in all, property investments are an ideal way to earn a passive income through an economic downturn. Real estate benefits are indeed numerous in amount and are highly advisable for people looking to invest.