Real estate and gold are the primary sources of investments in a most Pakistani households. Comparing such income sources on the go won’t give you much information about their differences. However, from a technical perspective, one could quickly analyze which one: real estate or gold is suitable for a specific moment when the investment is made. Such technical features can be: 

• Size of investment
• Length of hold
• Earning potential
• Liquidity
• Tax benefits
• Volatility 

This article will make these specialized features for judging an investment easy for you. We will go in-depth to answer the question of ‘which one is better by touching on all the abovementioned factors. Let’s do this. 

Size of Investment

As it sounds, it’s the amount (money) you need to buy two available options: real estate and gold. An average real estate plot, not home or apartment, can cost you as low as 12 lac rupees. Most people won’t have such giant bucks to invest in a business.  On the other hand, gold is available on the market at a bare minimum rate of 3000 rupees. That sum of money can easily be thrown in even by a person who belongs to a lower-income class. Therefore, it is solely up to the individual to decide what business to invest in. However, in our experience, for a short-term investment, gold can do better than real estate because of its volatility. More on that later. 

Earning Potential

The real estate’s earning potential is far greater than that of gold. In the long run, real estate appreciates more, thus giving a considerable sum of money to its owners. Moreover, you can transform real estate into:

1. Office spaces 
2. Event spaces 
3. Luxury weddings 
4. Event seminars and whatnot; 

Giving you monthly or quarterly rental incomes. And that income can be used to pay off the mortgage you took from the bank at the time of purchasing the property. While gold doesn’t have such a thing called monthly income or return, and because of its frequent fluctuations in the market, the investment value also does not remains the same. Thus making real estate a clear winner of the section. 

Length of Hold

Length of hold is when you can sell your real estate or gold. To play big on return of investment, you can hold your real estate for longer than gold. Because gold value appreciates or depreciates on a daily basis, and to predict the change of curve can be extremely difficult.  However, real estate is for the long run when putting a perspective on holding an asset. The change in real estate value takes time and can be easily predicted using the difference in the curve graph. So, gold is good at making an instant profit while real estate isn’t, but such profits aren’t enough to fill in your daily needs. 

Volatility

This characteristic of gold makes it a handsome investment choice for a short-term time frame, which is the most significant differentiating factor between real estate and gold. As gold value appreciates or depreciates w.r.t time – daily, choosing it is a problematic choice for the long-term players.  In contrast, real estate’s ability to provide a massive periodic change curve and easy-to-understand framework makes it less volatile compared to gold.  Data published after 18 years of the study shows that:  “Gold showed high volatility with an average loss of 21.52% and a maximum loss of 37%.” Therefore, keeping the volatility factor in mind, choosing real estate would be a sensible choice. However, it shouldn’t be factorized as a bad thing because it provides the investor with an opportunity that soon the gold value will rise, and through this, they can make profits. 

Tax Benefits

Tax benefits and loopholes can be turned into an excellent business opportunity for real estate investors. The governments also provide such benefits to push the investors into real estate that can ultimately boost the country’s GDP.   Note: Tax loopholes are the legal avoidance of some taxes on your property. It’s a legal choice for someone but talking morally, that’s another debate.  While for gold, no such exemptions or benefits are allocated by the government to people or investors. It’s because there isn’t any proper procedure for buying gold in Pakistan, which works under the government’s surveillance.  However, some jewelers import gold in Pakistan, and so they have to pay a 17% tax on importing precious metal.   

Liquidity

The liquidity of gold is great when compared to real estate. When you want to sell gold tomorrow that you have bought today, there are high chances you can find a buyer for that. But alternatively, real estate isn’t as liquidatable as gold.  You can’t sell your property in an instant; encashing it takes time and effort. Assembling property papers, putting a property on the market, and waiting for the right buyers may take a lot of time, sometimes even years. 

To Sum Up,

Gold and real estate are both resistant to inflation, which means when the value of currencies goes down, it doesn’t affect the market value of gold and real estate, making them the best investment option. But the differences should be mentioned explicitly, as gold is considered a “dead weight” until it’s sold. Similarly, for real estate, mastering it will take a lot of time. So both have their advantages and disadvantages, but only making them both a part of your investment plan will be suitable for your investment portfolio.