Real estate again emerges as best asset class for investment: Survey

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Updated: Feb 17, 2021 4:50 PM

The preference for real estate as an asset class has once again reached close to pre-COVID levels vis-a-vis the lockdown period in March and April.

Interestingly, the stock market – despite being volatile in nature – is the second preferred choice with 24% votes.

With work-from-home being a viable option today, many prospective homebuyers are looking at the peripheral areas that offer bigger homes and a better lifestyle at relatively affordable prices. Homebuyers preference to mitigate risks is also at all-time high with more than 61% preferring to buy from branded developers even if it is relatively costlier, reveals a CII-ANAROCK COVID-19 Sentiment Survey.

As per the survey, the preference for real estate as an asset class has once again reached close to pre-COVID levels vis-à-vis the lockdown period in March and April when we saw a dip (to 48%) due to the-then prevailing uncertainties. The rising preference is appropriately depicted in H2 2020 housing sales of ~80,400 units across the top 7 cities compared to 57,900 units in H1 2020, an increase of 39%.

Among various asset classes for investment like equities & mutual funds, FDs and gold, real estate continues to be the first choice with 57% respondents in favour of it. Interestingly, the stock market – despite being volatile in nature – is the second preferred choice with 24% votes.

Preference for gold saw a sudden rise during the lockdown period with 18% in its favour then – much above FDs. However, in the present survey, we can see slight dip in its preference as just 12% respondents now prefer it in the current scenario. Despite being risk-free, low interest rates has brought down investor interest in FDs and is now the last choice among all other asset classes.

Commenting on the survey, Anuj Puri, Chairman, ANAROCK Group, said, “Amidst the prevailing work-from-home culture and the economy showing green shoots of revival, we tried to gauge the mood of the prospective homebuyers and analyse their preferences. We saw that consumer preferences have altered significantly post the pandemic and new trends are seen to be emerging. Notably, real estate saw increasing interest against all other asset classes like stock market, FDs and gold post COVID. 62% respondents consider ‘now’ to be an ideal time for buying a home amidst prevailing lowest-best home loan rates and developer discounts & offers. Homeownership has gained top priority even for the millennials who previously shied away from it.”

In a major development, out of all respondents, 24% have already booked their property while 62% consider ‘now’ to be an ideal time to enter the real estate market.

The Indian residential market is now seen to be heavily dominated by end-users. As many as 74% respondents looking to buy a property now are doing it for self-use while just 26% are looking at it from an investment perspective. In comparison, during the lockdown period, the share of investors was higher at 41%.

Ready-to-move-in property continues to be the most preferred (29% respondents) among the prospective buyers. However, in comparison to both pre-COVID and lockdown period surveys, we saw a dip in its preference – at least 17% since the lockdown period and 6% since the pre-COVID levels.

One major factor influencing this change could be the fact that post COVID, the new supply was largely dominated by branded developers and buyers considered it safe to buy from them. Also, there is limited inventory available in the ready category. Another possible reason is that developers have doled out multiple discounts and offers including flexible payment plans for their under construction projects which attracted prospective buyers.

Interestingly, in the post-COVID survey results, property which will be ready within 1 year is the second most preferred choice for 27% property seekers.

Affordable properties (< Rs 45 lakh) emerged as the most preferred in the post-COVID survey, accounting for over 40% share as against 31% in the pre-COVID survey – an increase of 9%. Over 38% of this affordable housing demand in the post-COVID survey came in from Delhi-NCR, followed by 21% from Kolkata.

Rs 90-lakh budget range property took a backseat this time and stood at the second spot. Altogether, 67% of this demand came in from Bengaluru, Pune and Chennai. Availability of cheaper home loans was the key factor for majority of these respondents. Further, around 20% property seekers preferred Rs 90 lakh – Rs 1.5-cr budget properties – increasing by 2% against the pre-COVID survey.

Demand for luxury properties (> Rs 1.5 cr) also increased – from 9% in the pre-COVID survey to 11% post-COVID. Nearly 58% of this demand is from Mumbai (MMR), followed by Bengaluru and Hyderabad.

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