Is it the right time to invest in real estate and why?
When it comes to investment, we, Indians have always considered two ever-popular investment options: Real Estate and Gold.
They have held the test of times and have remained an always favorite amongst the general masses. Investing in gold is inherent in every household in India, thanks to the affordability and guaranteed returns while reselling. Investing in real estate is considered to be rock-solid because of the bigger returns in the long run.
The pandemic depressed the real estate market in the first and second quarter; investments started looking up once the unlock 1.0 phase was declared.
The resurgence in the search for affordable housing highlights the need of the hour, the value in owning a home. With many companies supporting remote work (as their employees have also worked in the housing sector’s service), the workforce is not equaled down per se to live in city centers or near their offices.
The Expectation of Real Estate in India
It is calculated by Niti Aayog that the sector will reach $650 billion by 2040 from the current figures of $120 billion. At present, the demand for homes is higher than the supply, it is estimated that there is a deficit of 10 million units in metropolitan areas.
The central government has also been promoting a slew of development programs to address the metropolitan housing shortfall. Most important has been The Smart City Project which intends to identify and create 100 smart cities across India to increase economic development.
Reserve Bank of India’s Housing Price Index Track shows a yearly rise of 11.6% in housing returns from the past 10 years from 10 major cities in India. The increase in returns is by far higher than the returns made by investing in gold or equity.
The returns on housing have faced active market trends for a decade, and it shows no signs of decreasing even during a pandemic.
The Turnaround in COVID
RBI’s interim relief also proved a benefit for homeowners which helped them to manage their EMIs for six months during the lockdown period. Low-interest rates, reduction in registration, and stamp duty fees by state governments afforded a breather for the real estate market during the trying times.
This new position of tax relief measures by RBI for the first home and second home buyers has developed the sentiment in the market.
COVID has witnessed a turnaround in the majority of buyers which has been fantastic; first-time car buyers have been especially responsible for the increase in demand for private cars during the unlock 1.0 phase.
A major part of the urban population favored staying in a rental before COVID; the sentiment is gradually moving towards owning a house. There are many reasons for it - the risk of the financial situation due to salary cuts or job losses made rentals unaffordable, resulting in many moving back to their parent’s house.
The fast adoption of Work-From-Home by many companies has now made remote working a possibility, reducing the need to stay in residence close to the office. Buyers are now actively looking at housing options which are affordable and of a comfortable size, keeping in mind that a designated space to work is necessary for the long run.
A Right Time to Invest?
Rentals may have dipped in 2020 but the curve is not going to remain dead. With the introduction of the vaccine and the complete opening up of the markets in 2021, the workforce will be back in the cities, pushing demand for affordable rentals.
The introduction of new SEZs in cities like Chennai, Bangalore, Pune, etc. will drive the demand for housing either for rent or purchase for the new workforce.
Time and again, real estate has proved flexible to a major change in society. Be it a war, economic slow-down, or pandemic, the returns have remained more or less constant for the homeowners. The time has never been so favorable for those wanting to purchase their first home or even a second home for that matter.
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