Where Indians are Investing Today?

Traditionally, there has been a high affinity for having physical assets such as precious metals, jewellery and real estate among Indians which started changing quite rapidly over the last decade. The reasons are varied. One important factor playing a role here has been the increased penetration of financial instruments tapping people living even in remote villages. The result is: the“only store of value”feature offered by physical assets is fast disappearing.

- Anuj Puri

Today technology is enabling banking solutions to reach remote villages much faster, while also making financial transactions easier and less expensive. With the focus on direct subsidy transfers, the opening of bank accounts is becoming mandatory for all, including those who were out of the banking system so far. With these developments, the only reason left for an individual to invest in physical assets is for returns.

Real estate is a good investment option, but not by taking leverage because returns will remain lower when compared to the cost of funding. However, residential real estate can be rented out which helps offset the monthly outgo of EMIs to some extent. And, of course, there is no denying the feeling of security and pride that every Indian derives from owning property.

Investing successfully in commodities or physical assets requires a higher degree of research, given their heavy dependence on fund flows. Not many, in their individual capacity, would want to or even can indulge in research-oriented investments on their own. One saving factor in this scenario will be REITs (Real Estate Investment Trusts) which can play a crucial role in bringing such individual investors into the real estate investment fold.