Considering investment flexibility and liquidity gold is a far more better investment option than real estate. Given the current market scenario it's more advisable to invest in gold than in property as the real estate market looks to be gloomy and heading downwards with no immediate respite to its existing investors itself who are trapped in it due to low sales.
While making any investment you need to consider multiple factors like amount you can invested, payment flexibility, taxes to be paid on purchase, maintenance cost, ease of liquidity, returns on investment, taxes to be paid on profits and finally how long you can hold your investment.
Let's have a look at both the investment option a bit more in detail.
The benefit of investing in gold is that your investment can be systematic yet very flexible. You can purchase 1 gram, 5 grams, 10 grams or a more gold depending on the amount of money you have. So, basically your gold investment can start from a few thousand rupees to lakhs or crores depending on your purchase power. While buying gold you have to pay a nominal tax of 3% as GST on actual gold rate and roughly 250 rupees additionally as gold coin making charges.
Gold as such needs no maintenance though you can still consider locker charges as your maintenance cost towards it if want to keep your gold safe, secure in a bank locker and avoid any risk of theft or robbery.
Gold being an easy liquidity asset can be converted to cash instantly further tt also allows you to have the flexibility of selling a specific amount of gold depending on your financial need at that very point of time. Gold is considered to be a safe investment which gives descent returns if holded for a longer period. Having a positive correlation with inflation gold rate generally covers the inflation securing your investment returns. While selling gold you may need to pay capital gain tax based on your holding period and further depending on your annual income slab.
Note:- We recommend you to buy gold coins from bullion traders when investing in physical gold. Buying gold jewellery as an investment option is a BIG MISTAKE! You can also invest in gold ETF or Sovereign Gold Bond but physical gold offers the best flexibility in terms of investment and liquidity. There are other new ways to invest in gold with PayTM gold being the popular digital gold buying option but these are not time tested, so not much can be said about them as-of now in the longer run.
Investing in property (real estate) in general is a high value and a high risk investment with a huge upfront payment having no flexibility. You can invest in an under construction property where you have to make slab-by-slab payments after every few months but then you carry the risk of project completion by the builder which has been a big issue in the market. Barring a very few big ticket builders the track record of most of the construction companies hasn't been good till date. The new RERA rules do offer some respite to the consumers protecting them against such builders but it's still a long way to go. If you are considering taking a home loan or another type of loan to buy a property you shouldn't even consider it as an investment option.
Buying property attracts stamp duty and registration charges anywhere between 7 to 12 percent depending on the type of property (resale or under construction) you choose to buy. Once in possession of the property you have to pay maintenance charges to the society, property tax to the government, internal repairing charges, electricity bills, water bills and more such miscellaneous expenses which people generally fail to consider when counting profits. Renting out the property will give you some respite but then in general rental revenue is taxable and is way low considering the huge investment you have to make.
So, to make any profit from property you have to rely mainly on the selling cost which further depends on the market sentiment. Liquidity of property in today market is a big issue with thousands of flats in major cities like Mumbai, Delhi, Bangalore and Chennai remaining unsold due to unaffordable property rates. The real estate market looks absolutely bad at this point of time and looks to remain the same for some time to come.
Profit made from the sale of property is taxable under short term and long term capital gain at 30% and 20% respectively. There is no way to avoid short term capital gain tax but you can get an exemption from long term capital gain if you re-invest the profits you make in NABARD or REC bonds which have a locking period of 3 years.
To invest in property and to make profits you need to be ready to spend big money and have the capacity to hold it for a longer period of time waiting for a favorable market situation.