According to an analysis by Anarock, Real Estate prices have increased at a compound annual growth rate (CAGR) from 6.7% in 2022-23 and 5.4% in 2023-24. This shows that the real estate industry has become a “popular hedge” against high inflationary pressures.
As we all know, the population is increasing daily, and hence the demand for housing is also growing. Due to increased urbanization, more people are migrating to cities for better opportunities.
An increase in the general prices of goods and services, i.e., inflation is slowly destroying the purchasing power of money over time and the demand for housing needs is pushing up prices.
“Real estate has emerged as a popular hedge for investors seeking to preserve and grow their wealth amidst inflationary pressures. An important factor in real estate investment is that it generates rental income that grows over time in response to inflation. And the Investors can further leverage their obtained assets to borrow funds,” said Anarock.
Due to the increased interest rates amid the inflationary period, investors who have secured fixed-rate financing get the benefit from lower borrowing costs in real terms, enhancing the profitability of real estate investments.
“Real Estate should be part of an investment portfolio as it is safer in terms of other investments such as stocks and bonds. They get negatively impacted by inflationary pressures. Real estate investments including residential, commercial, and retail – provide a tangible asset with intrinsic value over time. It holds potential price appreciation with high ROI in the coming years, “said Shobhit Agarwal, managing director and chief executive officer at Anarock Capital.
