When it comes to investment, we, Indians have always believed in two ever-popular investment options: Gold and Real Estate. They have stood the test of times and have remained an eternal favourite amongst the general populace. Investing in gold is ingrained in every household in India, thanks to the affordability and assured returns while reselling. Investing in real estate is considered to be rock-solid because of the higher returns in the long run.
The pandemic dampened the real estate market in the first and second quarter; investments started looking up once the unlock 1.0 phase was announced. The resurgence in the search for affordable housing highlights the need of the hour, the value in owning a home. With many companies encouraging remote work (as their employees have also worked in the housing sector’s favour), the workforce is not tied down per se to live in city centers or near their offices.
The Future of Real Estate in India
It is estimated 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 shortage of 10 million units in urban areas.
The central government has also been encouraging a slew of development programs to address the urban housing shortfall. Most notable has been The Smart City Project which aims to identify and create 100 smart cities across India to boost economic development.
Reserve Bank of India’s Housing Price Index Track shows yearly increase 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 earned by investing in gold or in equity. The returns on housing have withstood volatile market trends for a decade, and it shows no signs of waning even during a pandemic.
The COVID Turnaround
RBI’s moratorium relief also proved a boon 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 provided a breather for the real estate market during the trying times. This new set of tax relief measures by RBI for the first home and second home purchasers have improved the sentiment in the market.
COVID has witnessed a turnaround in the majority of purchases which has been unprecedented; first-time car buyers have been singularly responsible for the increase in demand for private cars during the unlock 1.0 phase. A major portion of the urban population preferred staying in a rental before COVID; the sentiment is slowly moving towards owning a house. There are many reasons for it – the uncertainty 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 rapid adoption of Work-From-Home by many companies has now made remote working a possibility, eliminating 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 an allocated 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 stagnant. With the introduction of the vaccine and the complete opening up of the markets in 2021, the workforce will be back in the cities, spurring demand for affordable rentals. The introduction of new SEZs in cities like Chennai, Bangalore, Pune, etc. will propel the demand for housing either for rent or purchase for the new workforce.
Time and again, real estate has proved resilient to a major upheaval in society. Be it a war, economic slow-down, or pandemic, the returns have remained more or less steady for the homeowners. The time has never been so conducive for those wanting to purchase their first home or even a second home for that matter.
(Source: Times of India)
