FD vs Real Estate: Where to Invest your Savings

Whether you’re planning a short-term or long-term investment, this guide will help you choose the best investment options between fixed deposit and real estate.
OPEN FD
FD vs Real Estate
OPEN FD
4 mins
16 July 2024

An investment portfolio should be a good mix of low-risk and medium-risk investments. Low-risk investments offer stability and lower but assured returns, while high-risk investments offer higher returns but carry higher risk.

Investors can choose investment options that suit their needs depending on their risk appetite.

Fixed deposit and real estate property investments have been among the most popular investments. However, they are both very different and cater to different requirements of investors.

Whether you’re planning a short-term or long-term investment, these considerations can help you choose between fixed deposit and real estate.

Fixed Deposits

Fixed deposits, commonly known as FDs, are a popular investment choice where individuals deposit a lump sum amount with a financial institution for a predetermined tenure at a fixed interest rate. FDs provide capital protection and assured returns, making them a low-risk investment option.

Taxability of FDs

Interest earned on fixed deposits is subject to taxation as per an individual's income tax slab. As per the regulations of the Income Tax Act, 1961, the interest accrued on FDs is categorised as 'income from other sources' and therefore, subject to complete taxation. The total amount of annual FD interest earned is incorporated into your gross income, and the tax obligation is calculated in adherence to the existing tax legislation.

Real estate as an investment option

Real estate is a tangible asset class that involves investing in properties like residential or commercial spaces. It offers potential for capital appreciation and rental income. However, real estate investments require substantial capital, maintenance costs, and may lack liquidity. Moreover, property values can fluctuate over time, and selling real estate can be a lengthy process. Investors should carefully consider their financial goals and risk tolerance before investing in real estate.

Guaranteed returns

People often fall prey to misconceptions that are hard to dispel. One such myth is that property prices are always on the rise. While property prices in India did reach dizzying heights once, there is always a possibility of stagnation or a drop in prices. In fact, this has happened on various occasions. Real estate has more to offer you if you invest with significant gains. However, if you're looking for guaranteed returns, then choose FD. A fixed deposit is not impacted by market fluctuations and offers a steady interest rate over time. Even with the help of the FD interest calculator, you can check your final maturity amount.

Fixed deposit variants

Highest Credit Ratings | Trusted with over 1.4 million Deposits | Assured Returns on FD
New Product

Digital FD Only on App/Web

INTEREST RATES UP TO
8.65% p.a.
Invest Online

42 months

INTEREST RATES UP TO
8.65% p.a.
Open FD

FD - Age below 60

INTEREST RATES UP TO
8.40% p.a.
Open FD

Systematic Deposit Plan

INTEREST RATES UP TO
8.65% p.a.
Start SDP

FD - Senior Citizen

INTEREST RATES UP TO
8.65% p.a.
Open FD

FD – Special Tenure

INTEREST RATES UP TO
8.65% p.a.
Open FD

Affordability and profit

People often take a loan or use all their savings to buy property. While this isn't wrong, you should be certain that you will be able to sell it for a profit. So, it is important to factor in the imbalance between purchasing power and the skyrocketing real estate prices across India. For example, the price tag for a 1 BHK flat in Mumbai is between Rs. 1.8 to Rs. 2 crore. Even if you take a 20-year loan to buy this flat, you will have to pay EMIs that are over a lakh. It means that you would need to earn a salary of Rs. 3.3–4 lakh per month. So, regarding a real estate investment, the question is whether you can afford it. You don't have to worry about making these calculations regarding fixed deposits. You can open a fixed deposit account with as less as Rs. 15,000 and earn stable returns.

Additional investment expenses

Apart from the apartment or property payment, you may have to bear other costs when investing in real estate. From ownership titles to stamp duty cost and registration charges, there is a lot to factor in. There have been instances where the rate of return generated from renting real estate has worked out to a meagre up to 2.5% annually.

A fixed deposit is more beneficial, as you can earn better interest rates. A simple FD calculator will help you understand how much you stand to make in the long run.

Process involved

When investing in real estate, you need to devote time to finding out all you can about the property, the neighbourhood and the infrastructure around it. Getting your property valued by a competent professional is also advisable to know if your price is justified. Property search also takes a significant amount of time. You must plan your time and resources and consider if you can spare the time required to invest in the right piece of real estate.

On the other hand, the process is simple when you plan to invest in fixed deposits. You can invest in a Bajaj Finance online FD from the comfort of your home and invest within a few minutes.

Transparency

The real estate system features information asymmetry, where the sellers have all the information and buyers can't always verify it. If you don't want to go through the hassle of verifying each claim, choose a hassle-free investment option.

However, you can track your investment online when investing in a fixed deposit. You can also choose an issuer based on safety ratings, so your investment is in safe hands.

Now that you know what is best for you, it’s time to plan your current and future portfolio. Ensure that an FD is part of it and apply for a fixed deposit with Bajaj Finance. It offers excellent FD interest rates and a flexible tenor to suit your financial needs.

Here's a quick look at the features and benefits offered on fixed deposits by Bajaj Finance.

Interest rate Up to 8.65% p.a.
Minimum tenor 1 year
Maximum tenor 5 years
Deposit amount Minimum Deposit of Rs. 15,000
Application process Easy and paperless online process
Online payment options Net banking and UPI

Frequently asked questions

Which investment is safe, FD or real estate?

Real estate has much to offer if you plan to invest in making significant profits over a longer period. However, suppose you are searching for assured returns that are assured. In that case, a Fixed Deposit is your ideal choice as it offers a consistent interest rate over time and is unaffected by market volatility.

Is a fixed Deposit a one-time investment?

Fixed Deposit is an investment option that allows customers to invest their savings starting at just Rs. 15,000 for a specific tenor at a pre-determined interest rate, compounded annually. At maturity, the investment amount and the interest rate are credited into the customer's account.

Suppose you are looking for a monthly investment option. In that case, a Systematic Deposit Plan allows you to invest a small sum of money starting at just Rs 5,000 each month and earn an interest rate as applicable on the day of investment.

Which is better, FD vs Mutual Fund vs Real Estate Investment?

FD is a safe investment option that offers good returns. Bajaj Finance offers FD rate up to 8.65% p.a. Special interest rates are also applicable for senior citizens.

Real estate is also a profitable investment option if you are looking for a long-term gain on your savings. Investing in real estate is the safest option globally and provides good and substantial returns for a long time.

Mutual funds are a market-driven investment option and are great for investors looking to diversify their investment portfolios.

FD, real estate and mutual funds are powerful investment options, and you must understand your financial goal to choose between the three.

What does real estate vs. fixed deposits investment mean?

Real estate investment involves buying physical properties like homes or land, aiming for appreciation or rental income. Fixed deposits are financial instruments where you deposit a sum of money with a bank or institution at a fixed interest rate for a specific tenure.

How can one mitigate the risk in real estate vs. fixed deposit?

In real estate, diversify across different properties and locations, conduct thorough due diligence, and consider property insurance. For fixed deposits, choose reupdated institutions like Bajaj Finance, or reupdated banks to open an FD with.

What are the key advantages of real estate investment?

Real estate can provide potential long-term capital appreciation, rental income, and tax benefits. It offers diversification from traditional investments like stocks and bonds.

What are the key advantages of fixed deposit in India?

Fixed deposits in India offer safety of capital, guaranteed returns, and flexibility in choosing tenures. They are a popular choice for risk-averse investors seeking stable and predictable income.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.