REAL ASSETS

A real asset is a tangible asset like gold, oil, and real estate. It has intrinsic value due to its utility. Its value is derived by virtue of what it represents. It can be measured physically.

INVESTMENT IN REAL ASSETS: Real Assets have low correlations to traditional stocks and bonds. - Because commodities have low correlations to stocks and bonds, they can be a good choice to lower your overall portfolio risk while enhancing your potential for better long-term risk-adjusted returns.

Hedge against inflation. - Inflation is the increase in the amount of currency required to purchase goods and services. Commodities can help protect investment portfolios against inflation because they represent the value of goods and services, not the value of currency.

- When it comes to investing - whether for income or for growth - you can't afford to ignore the eroding effect inflation can have on the value of your assets.

 Provide diversification.

- Real Assets are a unique class that can provide valuable diversification benefits to an investment portfolio. - Used in combination with traditional assets like stocks and bonds, they can potentially reduce overall portfolio long-term risk while increasing upside potential.

Psychic Pleasure. - Investment in real assets provides psychic pleasure. We can get mental satisfaction and security.

Safe Haven. - People perceive gold and other precious objects as a safe haven in times of trouble

REAL ESTATE

Real estate investment includes investment in residential house, commercial property, agricultural and, farm house, and so on. Real estate represents the largest component of wealth of individual investors.

Investment in real estate is attractive for various reasons :

Capital Appreciation - Capital Appreciation in real estate is fairly high. In India, historically, real estate has appreciated at a higher rate compared to other asset classes. Rental income -Real estate fetches a good rental income. Rental income on real estate is typically higher than the yield on other kind of investments. Leverage -A substantial portion of investment in real estate can be financed with bank loan. Tax shelter advantages. - Real estate investment offers several tax

Examples of real estate investments

Residential house

A Residential house represents an attractive investment proposition for the following reasons : - Rental saving and capital appreciation is high. - Loans are available for buying and constructing Residential property. - For wealth tax purpose the value of the Residential houses is reckoned at its historical cost not at its present market price. - Interest on loan taken for buying or constructing a residential house is tax deductible within certain limit. - Ownership of Residential houses provides psychological satisfaction.

Commercial property : The investment in commercial property may take the form of constructing a commercial complex or buying office or shop space in a commercial complex.

Agricultural land

: -

The advantages of investing in agricultural land are as follows

Agricultural income is not taxable (it is included in the total income for determining the tax rate applicable to the non agricultural income of the assessee.) Agricultural land is exempt from wealth tax. Capital gain arising out of agricultural land may be exempt from tax in some cases. Because some agricultural assets are not considered as capital assets. Investment in agricultural land has some problems. Some of these problems are

Farm houses may not be very safe. Agricultural activity is sometime uneconomical. Many states have laws that confer ownership to the cultivating tenant.

Sub urban land : Land within city limits is often very costly. However we can buy such an investment offers good scope for capital appreciation. Further it gives scope for capital appreciation. Further, it gives us an opportunity to move up to a quieter location that may not be very far from the city as the city expands.

Time share in a holiday resort

In the last 20 years or so, a number of time sharing holiday resorts have come up. We can buy one or two weeks in a holiday resort of our choice. This kind of investment offers several advantages. The outlay is modest and affordable. Often we get a choice of two or more locations If we dont use a certain week we can lent it or accumulate it. The value of our time share appreciates like any other property does. We dont have to bother about security or safety.

Conclusion

When compared to other kind of investments, real estate investment requires huge cash outflow in the initial stage, in the same way it gives high return in future

PRESENTATION ON PERSONAL SAVINGS AND TAX

TOPIC

REAL ESTATES

SUBMITTED TO

Prof. VEENA SHENOY BESANT WOMENS COLLEGE M.G. ROAD KODIALBAIL MANGALORE

SUBMITTED BY

Ms SHWETHA Mr Roshan cliven furtado II MBA MSNM BESANT INSTITUTE OF PG STUDIES, BONDEL

MANGALORE DATE OF SUBMISSION : 07/09/2013