Real Estate Investment: Hedge Against Inflation - Anarock

New Delhi, Jun 13 (PTI) Housing prices appreciated by a compound annual growth rate (CAGR) of 13 per cent in the last two years, property consultant Anarock on Thursday said highlighting that the investment in real estate has emerged as a popular hedge against inflation.

Investments in real estate help in generating rental income, besides appreciation in capital values.

"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," Anarock said in a statement.

Steady population growth coupled with urbanisation consistently fuels housing demand, it said.

"As more people migrate to cities for better opportunities, rising residential demand exerts upward pressure on prices. Moreover, real estate investments can generate rental income, which potentially grows over time in response to inflation. As the cost of living rises, landlords typically adjust rental rates," the consultant said.

Anarock said that investors can leverage their real estate assets to borrow funds for further real estate acquisitions.

"Real estate investments offer diversification benefits within a portfolio," Shobhit Agarwal, Managing Director and Chief Executive Officer of Anarock Capital, said.

"Unlike financial assets such as stocks and bonds, which may be negatively impacted by inflationary pressures, real estate, including residential, commercial, and retail, provides a tangible asset with intrinsic value. Diversifying investment portfolios with real estate holdings can mitigate overall portfolio risk and enhance long-term returns," he added.

Anarock said that housing prices have risen continuously since 2013, and in the last two years, appreciated at a CAGR of 13 per cent. CPI inflation moderated to 5.4 per cent at the end of FY24 from 6.7 per cent in the previous fiscal.

This trend signifies a clear outperformance of real estate prices compared to inflation, the consultant said.