Strong fundamentals like increased affordability, transparency and alignment in demand and supply will keep the demand for residential real estate investment upbeat over the long term
By Ram Raheja
With people relegated within four walls to abate the COVID crisis, the importance of safe living and owning one’s own home was highlighted as never before. This, along with a spate of government initiatives to support the economy saw policy rates being reduced to historical lows to invigorate consumption and stimulate growth across sectors.
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Furthermore, when compared to equities, real estate has proven to be the best long-term investment asset. Unlike equities investments, real estate investments are not subject to market volatility. As a result, real estate is a secure asset to invest in. It’s also a safe, concrete asset that will protect one’s future.
According to the Knight Frank report, with private equity players hopeful of a new residential business cycle, the residential segment has witnessed investments worth USD 234 million in Q1 2021 which was 64% of that witnessed during the entire 2020 and 38% of that witnessed in 2019. In volume terms (number of deals), the investment activity touched 100% of 2020 levels and 39% of 2019 levels in the first 3 months of 2021. This sharp bounce back in investment volumes was majorly driven by investor activity in the residential and office segments.
Furthermore, Institutional investment in real estate is likely to rise by 4 per cent to USD 5 billion (Rs 36,500 crore) during this calendar year with investors looking to snap up properties at attractive valuations amid the COVID pandemic, according to property consultant Colliers India.
A significant percentage of homebuyers are buying new homes due to the pandemic and not in spite of it. This trend is predominant in the upgrade demand. The pandemic has brought office, school, college and regular household activities within the boundaries of the home, making families realize the importance of having additional space in their houses, thereby creating fresh demand for upgrading to larger homes which may not have been a necessity earlier. Furthermore with the majority of people working from home; larger apartments, primarily 2 & 3BHKs. are in higher demand.
Another interesting trend is that home ownership which was being deferred due to the ‘uberisation culture’ of recent years has made a strong comeback due to the pandemic. One thing that has changed dramatically as a result of the pandemic is that individuals are now more concerned than ever about their health. As a result, the types of residences in demand have shifted. People nowadays desire a holistic living area, an oasis where they may live a healthy lifestyle.
Growth witnessed over the last few months has been led more by demand and less by price making it more resilient and sustainable. Strong fundamentals like increased affordability, transparency and alignment in demand and supply will keep the demand for residential real estate investment upbeat over the long term.
(Ram Raheja, Director, S Raheja Realty. Views expressed are the author’s own.)