With The Fervour of Festivals Back, Is 2021 Last Quarter The Right Time To Invest in Indian Real Estate?

Amid the coronavirus pandemic, real estate has once again emerged as the safest investment option. For Indians, owning a home has been traditionally considered a matter of prestige as well as safety. The sector has been in the doldrums from the last few years with the sharp rise in equity markets with investor sentiment favouring the latter. A preference for paying rents as against making long-term investment commitments in homes gained prominence.

The reluctance to invest in real estate was based on shorter returns, a higher rate of interest on home loans and the argument that it is cheaper to rent than buy a house. However, the coronavirus pandemic that we are facing right now will change the mindset.

For starters, the ownership of the house brings with it an unmatched sense of security. The people will seek to own their personal house and that will be the silver lining going forward. The ongoing weakness in the equity markets will further aid the sentiment and revive consumer interest in the sector. The value of properties in the real estate market will, therefore, remain stable.

Investors will seek greater transparency and trust in their investments. To put it into perspective, the private market commercial real estate returned an average of 9.85 percent over the past five years, according to the National Council of Real Estate Investment Fiduciaries’ (NCREIF) July 2018 data.

The credible performance was achieved, together with low volatility relative to equities and bonds, for highly competitive risk-adjustment returns.

On top of everything, real estate is not paper money, this is the asset you can hold tangibly which further enhances its reliability and return on investment.

The positive relationship between GDP growth and demand for real estate stems from the inflation hedging capability of the sector.

As economies expand, the demand for real estate drives rents higher and this, in turn, translates into higher capital values which make real estate a secure investment in that sense. Thanks to the Reserve Bank of India (RBI) announcement for reducing repo rate by 75 bps and the new base rate is 4.4 percent will ensure the reduction of the home loan interest rates which is a further sentiment booster. Fence-sitters must use this period wisely and look to enter the market actively.

The post-pandemic world will be good for the real estate sector, the one sector that will emerge as the silver lining in such a bleak scenario. Timing is crucial when one is considering investing in real estate. And the time now is ripe to put it through action. Financial security is foremost on people’s minds and one must deploy their money through multiple avenues. In the current situation, real estate offers you the best bet  - stability, security and safety.

-Ram Raheja is Director at S Raheja Realty. The views expressed are personal