33.18 Why is Real Estate a crucial Asset Class to consider?

The Real Estate Market has seen both sides of the coin.

Investments that have seen 2-3x growth, and Investments that turned out to be scams.
But then does this mean the asset class is bad?
Absolutely not.

More importantly, it’s moving to be a necessity to have a hard asset in your portfolio.
Why?

Case Study 1

Let’s take the case study of Argentina.
The Inflation in Argentina is upwards of 100%.

Since 2005, the inflation has been steadily going up.
This ultimately leads to a need to inflation-proof your investments.

This situation of increasing inflation is playing out in India as well.
In India:

1. The Debt is increasing
2. Debt/GDP is somewhat stable
3. Productive debt is however reducing

This ultimately means that the debt that is taken is not spent productively.

This will lead to:

1. More Indirect taxations
2. Increasing inflation
3. More regulations on the middle class

In India, the official inflation may only be 5-6%.
But the actual number is way higher for a normal middle-class person.
And the first step to take to start inflation-proofing your investments is to control your living situation.

1. Own a house
2. Own a land where you can build a house

Case Study 2

This is the global debt chart:

In 1970, Debt-GDP was at 100%.
That is the Debt= Income

In 2022, Debt-GDP is at over 250%.
Debt= 2.5 x Income

Post 2020,
The US printed 20% of its existing money supply i.e: 100 units in 2020 became 120 units in 2021.

Hard Assets are your hedge against such a macroeconomic downtrend.

• Real Estate
• Gold
• Bitcoin

Hard Assets will go up over the long term.

How will the government repay their debt?

• More Money Printing
• Increased Taxes
• Removed Benefits (eg: Indexation Benefits removed)

This will lead to Fixed Supply Assets going up in value.
Now what type of Real Estate to buy?
That’s a whole different concept that we will cover in the coming newsletters.

Source

• Akshat Shrivastava 30 days Newsletter.