'There is an increase in inflation' - a sentence we hear now more than ever before. Against the backdrop of a pandemic and an ongoing war, the specter of rising inflation has reared its ugly head yet again. But what exactly is inflation? To put it in simple terms-as prices of goods and services rise, the purchasing power of my and your money decreases.

In an era of rising commodity and service costs and evaluating return on investments carefully, homebuyers are faced with a critical question - what does this mean for investing in real estate?

Now if you are a newbie in the real estate market, you might not be aware of the old adage - Real estate is a good hedge against inflation!

So if you are reevaluating your decision to buy a house or not, in an environment of rising inflation in India, the short answer to your question is YES!

For the longer answer, you have to read the rest of the article.

So what exactly makes real estate a good investment vehicle during inflation?

There are three parts to answering this question.

Land Valuation

The first and foremost is a steady increase in Land Valuation in India. Land prices historically have continually increased and will only increase further going ahead.

As per a report, residential plot prices have risen by 7% CAGR every year since 2015 in eight major cities, indicating that the value of land will only rise which means increasing land prices will lead to better returns in real estate.

Falling Metal Prices

Secondly, the cost of construction materials are coming down after seeing a sharp increase in the past few months. As per reports, in the last five months, cement, steel, sand, and bricks saw a price rise in the range of 13 to 63%, leading to fears of rising real estate prices due to higher input costs.

But with the IMF slashing its growth outlook for the US and highlighting the country will "narrowly" miss a recession has put pressure on metal prices.

The fall in prices of metals could mean that real estate prices might not see a price rise immediately.

The Right Location

Location is perhaps one of the most (if not the most) vital parameters a homebuyer considers before purchasing a house.

If you have already found a place that happens to be in one of the most sought after places for residences, the value of the real estate there is only going to increase with further development of the area. If you buy a house in the same location the next year, it could cost much more than it does today.

In case you are someone, who wants to put your home up for rent, you benefit from higher rent i.e high return on investment.

Another sector is real estate, especially domestic housing. Second-hand homes are ideal long-term, big-ticket investments as home-ownership comes with the added benefit of tax-savings, asset leverage for loans, passive income through rent, or saving on rental expenses.

The value of real estate in India has never been affected by any level of uncertainty due to inflation, making it a very safe investment.

As a result, it remains the most viable option compared to other investment options.

Additionally, rather than a bank deciding your return like in other investment options, you are in control of the return of your investment. Moreover, real estate ownership can provide a person with tax benefits.