Real estate ‘popular hedge’ against inflation | Here’s how to leverage it for wealth creation
Real estate has emerged as a “popular hedge” against inflation, says a report. Real estate investments can generate rental income, which potentially grows over time in response to inflation, ANAROCK research has said in its report.
On how residential real estate investments can help retail investors against high inflation, it said that as the cost of living rises, landlords typically adjust rental rates. Also, investors can leverage their real estate assets to borrow funds for further real estate acquisitions, the report added.
Residential real estate prices have risen continuously since 2013, and in the last two years, appreciated at a CAGR of 13% while CPI inflation moderated by 1.3% on an annual average basis to 5.4% at the end of FY24, the report says, adding that the trend signifies a clear outperformance of real estate prices compared to inflation.
“Inflation, the gradual increase in the general prices of goods and services, erodes the purchasing power of money over time. For investors seeking to preserve and grow their wealth amidst inflationary pressures, real estate has emerged as a popular hedge against this dreaded but inevitable dynamic,” says ANAROCK research.
Shobhit Agarwal, MD & CEO – ANAROCK Capital, says, “After the 2019 elections, average residential prices across the top 7 cities have appreciated at a Compound Annual Growth Rate (CAGR) of 6% – rising from Rs 5,600 per sq.ft. in June 2019 to Rs 7,550 per sq.ft. by the end of FY 2024. A similar trend was witnessed in relation to the 2014 elections. Average prices across the top 7 cities saw an annual rise of over 6% in 2014 when compared to the preceding year – from Rs 4,895 per sq.ft in 2013 to Rs 5,168 per sq.ft. in 2014.”
Conversely, before the 2019
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