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Why putting 80% of savings in property hurts Indian families
An RBI report reveals typical Indian families put 70-80% of net worth in real estate, yet real returns are only 1-4% after inflation. Costs and illiquidity make it a poor investment.
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A 2017 Reserve Bank of India report found that a typical middle-class Indian household funnels 70% to 80% of its net worth into real estate. No financial adviser would recommend an 80% weighting in a single stock. The property market demands exactly that.
Consider the raw returns first. Nominal home prices in India have compounded at roughly 8% to 10% a year over the past two decades. Inflation averaged about 6% to 7% in that period. The real return, before any costs, sits somewhere between 1% and 4% a year. That is not compounding wealth. It is treading water.
The cost side cuts deeper. Stamp duty alone runs 5% to 8% of the purchase price in most states. Registration and legal fees add another 1%. A typical buyer pays 7% to 10% in transaction costs just to get in. Selling carries brokerage of 1% to 2%, plus capital gains tax if held for fewer than three years. Those frictions consume a large chunk of the nominal gain.
Maintenance adds more. A 1,000-square-foot flat in a metro will cost roughly ₹30,000 to ₹50,000 a year in society maintenance, property tax, and periodic repairs. Over 15 years that adds up to ₹5 lakh to ₹7 lakh, money that could have been deployed elsewhere.
Liquidity is another layer. A listed equity can be sold in seconds at a known price. A property in a tier-1 city takes 8 to 14 months to find a buyer, on average, according to broker surveys. During that window the market can shift. An urgent sale often forces a 10% to 15% discount.