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.

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.

Hard Assets will go up over the long term.

How will the government repay their debt?

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.


Thoughts 🤔 by Soumendra Kumar Sahoo is licensed under CC BY 4.0