As diversification is the key when it comes to de-risking investment portfolio, real estate in the current scenario will work as a safe haven when it comes to securing accumulated wealth.
In today’s day and time, it is crucial for home buyers to understand how to reduce risk perception while investing in real estate. As diversification is the key when it comes to de-risking investment portfolio, real estate in the current scenario will work as a safe haven when it comes to securing accumulated wealth.
Today more than ever, before making any investment decision, let alone in real estate, it is critical to do ample research, consult trusted advisors and then take an informed decision to invest in a long-term asset. And therefore, no amount of research is enough research, especially when it comes to investing in property.
With construction in the realty sector coming to a standstill across the country and ambiguity over project completion, due to disruption in supply chain, labour availability, and liquidity issues, buyers are in double mind on how best to de-risk their investment decision. This has not just led to a strong shift in consumer behaviour and value system, but also practicing more caution and looking for additional reassurance and handholding.
The government has provided some support to developers with six months extension in the completion dates for projects under RERA, to de-stress the industry, but does that help consumers to take a decision on where to invest and if it’s the right time?
While the uncertainty is likely to loom over next two quarters, it has also created a sense of urgency and commitment in the mind of serious home buyers, who are looking to invest in real estate to secure their future. Additionally, to reap benefits such as discounts and schemes and scope for harder negotiations in the current environment.
While the earlier marketplace was filled with speculators, today’s customer who has the intent and the money has also got the clarity of thought on where they want to invest. While in the past, real estate investments were across residential, commercial, and retail, for short-term benefits like rental yield, today’s consumer is largely looking at residential properties primarily for end-usage. Which is why compared to investment in other assets, when it comes to investment in residential real estate, where the need is of end-usage and not rental returns, the risk involved on RoI is minimum.
The biggest impact of the pandemic and the lockdown thereafter has been in the typology. Two major trends that have emerged are – rise in demand for condominium living, a concept relatively new to Indian home buyers and thereafter demand for ready-to-move-in or near completion units, which involve low risk, readily available to possess with easy finance options.
Ready-to-move-in condos are also showing higher traction due to the expected delay in deliveries associated with under-construction units. With no Goods and Services Tax (GST) payable on resale flats, the demand for ready-to-move houses have soared dramatically since the lockdown and the industry is also seen moving towards this trend.
A first-time investor interested in residential property, is opting for ready-to-move-in house not just as an investment of accumulated fund. But the decision is also sentiment driven – to safeguard their own future, future of their aging parents and that of next generation. As a result, potential buyers who have been in discussion for over 3-6 months, have decided to close the deals during the lockdown.
The demand is reflecting across segments, starting from affordable housing, to premium, and luxury – depending on the need and investment value. Another trend, that will emerge from this period, is demand for condos and integrated townships in Tier II cities that are becoming prime destination, beyond the metros. With accessible pricing, more space, and better returns on investment, tier II cities will witness increased investment from home buyers who want to minimise risk and maximise returns. In a post Covid era, some buyers are also looking for a lifestyle that is away from the hustle of mainstream city life.
To sum-up, before making an investment and choice of property, firstly it is critical to align your investments to your risk appetite, financial objectives, and matching them to returns potentials. It is sensible to invest in credible developers who have had a proven legacy to deliver on commitments, and properties that are RERA approved, to minimise risk. Also, make your investment decision is based on your own requirement, and not a general trend, as real estate offers some diversification against other asset classes and its long-term outlook continues to remain attractive. Assess your financial condition not just for today but also for five to ten years from now. And, lastly, keep monitoring interest rates to benefit from the low-interest regime, if you are considering taking a loan.
(By Aakash Ohri, Senior Executive Director, DLF Home Developers Ltd)