Inflation affects everyone equally and today it is known by every commoner. It affects major investors whenever an investment is of long term. One of the ways to manage effects of inflation is by investing into real estate properties.
There are many reasons people invest in real estate. Primarily, they buy in a property to live in; where their major investment is done and it provides them with a sense of security and accomplishment. In addition to this, there are savings that can be made due to not paying rent which tends to increase every year.
A person buys a property for himself and puts it on sale in the hopes of earning a profit. Investing in real estate is not like investing in other avenues such as PPF (Public Provident Fund), equity or a fixed deposit scheme. In real estate investment, a successful undertaking takes longer to become fruitful.
It is advisable to not buy and sell any property for short durations because, heavy taxations comes into the equation. This is a reason some people avoid buying properties in short durations and according to the taxation laws laid by Income Tax Act, a long term investment are taxed leniently. Moreover, people buy a property and give them on rent which goes forth with the long term plan. In the eyes of law, ’long term’ investment should mean an owner of the property is going to hold that property for more than 36 month, anything less than that is a ‘short term’ capital investment and general tax rate is levied on the property. In addition, others aspect is ’Indexation’ which is driving the inflation effects on the property, which has benefit limited to the long-term investment schemes only.
You can avert paying the long term capital gains taxes in case you invest the gained capital in a new property and hold it for longer term ie. 36 months. This will keep multiplying the gains over a period of time.
Therefore, building wealth is a steady process and one should not expect gains in a very short period of time. Investing in properties is a sure-fire way to bout inflation and ensures high returns.