Gold triumphs over real estate buys in India
Gold has beaten real estate buys in South India by a huge margin as the most preferred mode of investment.
Posted: Friday , 17 Jan 2014
MUMBAI (Mineweb) -
In the Southern states of India, where real estate is often considered one of the safest investment options, gold has triumphed investments in property. A recent study has shown that over the last three years, 70% of Kochi residents in Kerala opted for gold against 9% who chose real estate.
As a region, South India is the largest consumer of gold in the country, with jewellery chains increasingly targeting the region with their expansion plans. The four southern states tend to account for over 40% of the nation's overall gold demand.
The study also found that demand for gold as an investment has been gaining momentum among consumers, especially in Cochin and even across Delhi, in North India. Though gold is price sensitive, the study held that it is insensitive to price increase in certain quarters, especially in Kerala.
“Gold has been selling well traditionally in the South, especially in Kerala and Tamil Nadu. For many people, it is increasingly accepted as a good investment," said Anant Padmanabhan of Chennai based jewellery chain, MRS Jewellers. He added that apart from Chennai, which had sort of become a hub for gold consumption, towns like Madurai, Coimbatore and Salem have become important centres for the sale of the precious metal.
The objective of the study, conducted by the Centre for Public Policy, a Delhi based think tank, was to understand the investment patterns of gold and to identify how fluctuations in the gold market affected consumers.
Responding to the survey, city residents in the South said they preferred gold because of its stable nature, while those in North India said they preferred government provident funds since they were safer and afforded better returns with high interest rates. Stocks, government and oil bonds, post office savings and insurance were the other major investment preferences in Delhi.
“Gold continues to be a major investment haven for consumers in Cochin. Though the youngsters are not an informed crowd when it comes to variation in gold prices, most are impulsive buyers of bullion," said Somnath Menon, of Bhima Jewellers, which has a chain of over 39 stores in the South.
The All Kerala Gold and Silver Merchants Association president B Girirajan said that a severe supply crunch had affected demand in South India, especially during the Pongal festival that was celebrated across the country on January 14.
People in Tamil Nadu celebrated Pongal, the harvest festival, on Tuesday, by getting up early and visiting temples with their offerings of gold coins. The Pongal festivities take place over four days.
One of the most popular festivals in Tamil culture, Pongal signals the end of winter and the onset of spring. Interestingly, the festival of Makar Sankranti, which traditionally coincides with the beginning of the Sun's northward journey when it enters the sign of the Capricorn, was also celebrated across the country on the same day, January 14.
Makar Sankranti has a very special significance for Hindus, because the festive period starts from this day. Given the auspicious timing, people tend to conduct religious ceremonies, buy new houses or new cars and even get married in the weeks ahead. All these ceremonies involve the participation of gold, either as ornaments or as coins.
“Indian festivals and the wedding season demand is likely to lift gold prices higher. Since Kerala is currently celebrating Pongal, more shoppers are walking in given the slide in gold prices,” said Girirajan.
He added that though the young generation prefers diamond jewellery over plain gold jewellery, “we have noticed many youngsters moving to gold jewellery now, since prices have dropped by Rs 3,000.”
Girirajan added that some youngsters “buy gold now as an investment and wait for the opportune time to sell it and buy their first house. Since it can also be given to a sibling, or used in the house on any occasion, gold is always a preferred mode of investment.”