How much of your net worth should be in real estate?
RBI found 84% of Indian household wealth sits in property and physical assets. Why that's risky, and how to bring a 75% share down without selling.
5 min read
How much of your net worth should be in real estate? For most Indian families, the flat is the biggest thing they own. That's normal. The trouble starts when it's nearly everything they own. Here's why it matters, and how RupeeFrame checks it.
Why too much real estate is a risk
- You can't sell a slice. A hospital bill or a job loss needs cash this month; a flat takes months to sell.
- One asset, one city. A slow market or a local slump hits all of it at once.
- It earns little in cash. A home you live in pays nothing; rented homes in India typically yield 2 to 3% a year.
The RBI's Household Finance Committee found Indian households hold far more in physical assets than households in other countries, and that they'd gain by moving more into financial assets, starting with gold.[1] SEBI's investor booklet makes the same point from the other side: spread money across asset classes to reduce risk.[2]
How much of your net worth is in property? An example
| Amount | |
|---|---|
| Flat, today's value | ₹1.1 Cr |
| Home loan left | ₹35 L |
| What they own of the flat | ₹75 L |
| Everything else: funds, EPF, FDs, gold | ₹25 L |
| Net worth | ₹1 Cr |
The flat is ₹75 L of a ₹1 Cr net worth: 75%, over the 60% line. For it to sit at the line, the family needs about ₹50 L outside the flat.
Bringing the share down, without selling
- Keep investing outside property: SIPs, PPF, NPS, gold. The share falls as the rest grows.
- Think twice before a second flat on a loan. It adds to the same concentration.
- Pay the home loan as planned. Prepaying raises what you own of the flat, so weigh it against investing.
Thinking of buying more property? Compare it with renting and investing the difference.
What this doesn't mean
- Property isn't a bad investment. The risk is having almost everything in it.
- The line is yours to set. RupeeFrame uses 50% if you take little risk and 70% if you take more.
- Values are estimates. A flat is worth what a buyer pays, less brokerage and tax.
Net worth is everything you own less everything you owe; property counts at today's value less home loans. For illustration only.