09/08/2021
Is real estate a good investment in India?
1/8
Real estate: The boom, bust, boom sector
One of the unexpected happy stories of the ongoing Covid pandemic has been the revival of the real estate sector. Low interest rates, cut in stamp duties and the popularity of work-from-home culture resulted in a K-shaped recovery in the residential segment in the pandemic year. And why only domestic investors, even FPIs continue to repose faith in the realty sector.
2/8
FPIs still investing in realty stocks
While foreign portfolio investors (FPIs) went on a selling spree on Dalal Street in the last two months amid fears over earning downgrades due to Covid 2.0, inflows into realty sector continued. Real estate stocks saw net inflows of $213 million in April and $710 million in March.
3/8
Proof is in the pudding: Housing loan market rebounds
The housing loan market rebounded, registering a year-on-year growth of 9.6% in terms of portfolio outstanding (PoS) in the third quarter of FY2021, despite the Covid pandemic, says a report released by credit information bureau CRIF High Mark. While growth was flat in quarters ending March 2020, June 2020 and September 2020 due to Covid-19 pandemic, there was a rebound in housing loan originations in the quarter ending December 2020, leading to 4.52% per cent growth in PoS, the report noted.
4/8
Why Covid won’t dampen medium-term outlook for realty estate
Mahesh Patil of Aditya Birla SunLife AMC says: “Interest rates are not going to go up in a hurry and are likely to remain below 7%. Property prices are also stable with only mild corrections. I do not see property prices going up in a hurry. The affordability gap remains fairly good compared to what it was five years back and that will see a revival in the sector slowly and steadily. The lockdowns could be a temporary dampener in terms of new bookings. But that does not alter the medium term outlook for the sector which is reviving."
5/8
So who all are buying these properties?
According to Anarock, 90% of the total housing sales in Delhi NCR & MMR (Mumbai Metropolitan Region) post Covid-19 (July 2020 - March 2021) period was to end-users in both Delhi and Mumbai and only 10% to investors. This appears to be the 'new normal' in pandemic. Only 15% of end-users in Delhi NCR upgraded to bigger property vs 65% in MMR.
6/8
Structural transformation in housing demand: Deepak Parekh
According to Deepak Parekh, non-executive chairman of HDFC: “It is not only pent-up demand that will push growth but the country is going through a structural transformation in housing demand. This is because of a combination of first-time homebuyers, and customers moving up the property ladder to shift to larger homes or acquiring a second home in another location, that is at play.”
7/8
Organised players gaining share
Listed real estate players reported higher sales during the pandemic than non-listed ones. The market share of listed realty players increased to 22% in the first 9 months of FY21, up from 6% in FY17, according to Anarock. The top 8 listed players sold approximately 21.23 million sq. ft. in the first 3 quarters of FY 2021 - 2% more than in the corresponding period of FY 2020. Gautam Trivedi of Nepean Capital says companies that are focussed on residential real estate like Godrej would do well as they are the first adaptors of video technology.
8/8
Millennial buyers & going for the burbs
Post Covid, real estate's popularity as an investment asset class increased perceptibly. A CII-Anarock Covid-19 Sentiment Survey showed that nearly 62% of respondents considered it expedient to buy homes right away. The work-from-home and online education culture resulted in buyers seeking larger homes, even if it entailed moving to peripheral areas. Also 48% of respondents favouring real estate as an asset class are millennials aged 25-35 years compared to 17% before Covid-19.
