The Hidden Risks of Real Estate Investment: Why Properties May Not Be the Golden Goose
While many investors see real estate as a safe haven for wealth, Chartered Accountant Nitin Kaushik warns that relying solely on property can lead to financial pitfalls. Here's why.
Real EstateInvestmentWealth AccumulationEquitiesLiquidityReal EstateSep 29, 2025
Kaushik used an example to illustrate his point. Consider purchasing a flat for ₹1 crore. Assuming an annual appreciation rate of 6%, the property’s value after 20 years would be around ₹3.2 crore. At first glance, this seems like a strong return. However, when additional factors are accounted for—such as low rental yields of 3.5–5% annually, maintenance costs, and stamp duty—the picture changes.
Property also lacks liquidity. Selling a flat can take weeks or months, making it difficult to access your money quickly if needed. This limitation can prevent investors from responding to other financial opportunities or emergencies.
Equity vs Property: The Growth Advantage
Kaushik says that by comparison, investing the same ₹1 crore in equities with an assumed 12% annual growth rate over 20 years could grow the investment to approximately ₹11 crore—more than three times the property’s value. Beyond higher growth, equities offer regular dividends, providing a source of cash without needing to liquidate the principal investment.
The Overlooked Trap: Compounding and Liquidity
Kaushik emphasizes that the critical factors investors often forget are compounding and liquidity. Property grows steadily but slowly, and access to funds is restricted. Equities, on the other hand, benefit from compounding interest and offer flexibility, allowing investors to leverage gains or reinvest as needed.
The comparison shows an important lesson for investors: wealth is not only about asset appreciation but also about accessibility and the power of compounding returns. While property may offer emotional satisfaction or a sense of security, ignoring the growth potential of equities could slow long-term wealth accumulation.
Frequently Asked Questions
What is the main risk of relying solely on real estate for wealth creation?
The main risk is that real estate grows steadily but slowly, and it lacks liquidity, making it difficult to access funds quickly. This can prevent investors from capitalizing on other financial opportunities or handling emergencies.
How does the growth potential of equities compare to real estate?
Equities generally have a higher growth potential. For example, an investment of ₹1 crore in equities with a 12% annual growth rate over 20 years could grow to approximately ₹11 crore, compared to ₹3.2 crore for a property with a 6% annual appreciation rate.
What are the additional costs associated with real estate investments?
Additional costs include low rental yields (3.5–5% annually), maintenance costs, and stamp duty. These costs can significantly impact the overall return on investment.
What is the benefit of compounding in equities?
Compounding in equities allows investors to earn interest on both the initial investment and the reinvested earnings. This can lead to exponential growth over time, which is not typically seen in real estate investments.
Why is liquidity important in investments?
Liquidity is important because it allows investors to quickly access their funds when needed. This is crucial for responding to financial opportunities or emergencies, which is a limitation with real estate investments.
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