If Aniket has limited or no other assets, beginning with a large, indivisible, illiquid and material wealth Like a piece of land is a bad idea. He and his wife need to build liquid assets into deposits, mutual funds, bond And share First. These assets can be sold in parts when money is needed. They can also be used as collateral if a loan is to be taken. There is a psychological satisfaction in owning a piece of land, the value of which is admirable, but it is of little or no value in day-to-day life for Aniket. The price hike cannot happen in a hurry and he can keep the land for some time before turning it into profit.

Also, taking a loan to buy a piece of land would mean that a huge amount would go into EMIs, which Aniket sees as inevitable savings. But that would give him little leeway for another loan, or any other savings. If he essentially wants to save, a systematic investment plan in mutual funds will serve the same purpose, but with more flexibility. He has the freedom to waive the installment in case of cash flow problem; He can draw from investments in case of urgent need; And the value of his investment will also appreciate over time.

In comparison, debt against land is highly inflexible. If the intention is just to buy the land and keep it for appreciation, Aniket also loses all the tax concessions that come with buying the house. Unless he actually builds a house on the land, neither he nor his wife will get tax benefits on the principal or interest paid on the loan taken from the bank. Therefore, buying land is extremely tax inefficient. Aniket and his wife should instead consider other investments, or buy a flat they can live in, if they are willing to get the property as a property.

(Content on this page is courtesy of Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.)