Will Investors Return To Real Estate Post COVID-19 ?

Will Investors Return To Real Estate Post COVID-19 ?
Will Investors Return To Real Estate Post COVID-19 ?
Amit Modi - 27 May 2020

During this time of global pandemic people are shifting to online and are constantly glued to the news. It is the time when everyone has seen how sensex and gold prices have tanked leading to huge financial losses to investors. The high uncertainty of these investment vehicles has come out as good news for real estate.

Investors who have burnt their pockets in equity will now look to pick up real estate assets. These investors are not particularly interested in the configuration but concerned more about the long term asset and the returns it would fetch them. Overall, it is just a matter of a few months. Smart ones have already started putting in money foreseeing the returns from well thought out projects that are following the new lifestyle sense of people in the post coronavirus era.

The other set of people to come and invest in real estate are the first time buyers and the end-users. With low home loan interest rates, this is an opportune time for people to invest in real estate. The real estate boom started around 2003-04 wherein the home loan rates were close to 7 per cent. This led to the immense growth of the sector and it is after a gap of 15 years that interest rates are once again near 7-7.5 per cent. Surely, it will help the sector in post-COVID-19 time. The recent fall in the home loan interest rate is mainly owing to various measures announced by RBI including a reduction in the repo and reverse repo rate as well as an infusion of liquidity in the banking system to the tune of Rs 3.74 lakh crore. The apex bank has also announced infusion of another Rs 1 lakh crore in All India Institutional Finance and NBFCs including Micro Finance Institution.

This is for the first time in the last 15 years or so that home loan rates of major banks and housing finance companies have fallen below 8 per cent with SBI offering the lowest rate amongst all. With real estate being an interest-sensitive sector, it will help the sector attract buyers and investors. In fact, during the pandemic many tenants were harassed by landlords making them think of investing their savings in having a roof on their heads.

Another factor that will attract buyers and investors to real estate is low pricing at this juncture. There has not been any increase in real estate prices in the last year. Considering the inflation and cost of construction it can be said that buyers and investors are getting the property at 20 per cent cheaper rates.

The residential segment takes care of the housing needs of the citizens and there always will be a demand for it. With an increase in population and a growing economy, the sector will keep on getting good business with the regular flow of investors who by now have realised the utility of investing in real estate assets and at the same time safeguarding your investment. Real estate may now see an influx of people ready to buy even the smaller units as their first investment. It will also come up with innovative ideas thereby offering more options to prospective buyers and investors.

The author is the Director ABA Corp & President (Elect), CREDAI Western UP