Will Real Estate continue to offer a profitable Return on Investment in 2022-23?

For a long time, almost a decade, real estate was a dud investment for many investors. However, the property market is back on the radar as the homebuyers are flocking for the shopping spree thanks to limited supply, ample liquidity and the rock bottom interest rates.

In a paradoxical fate of events, everyone was skeptical about investing in real estate due to the looming threat arising from the arrival of the lethal Covid-19 pandemic, the industry bounced back with great momentum and sales jumped to new highs.

Like a lot of other sectors, the real estate industry too was unprepared for the wrath of the pandemic but following the second wave, it showed remarkable resilience. The new launches came to halt but the demand was higher. However, 2021 was a game changer for the sectors. As the world's largest vaccination drive gained momentum, the confidence for the reality as a sector rose and financial year 2022-23 is now seen as the turnaround year for the sector which will lead to a robust boom for the industry.

There is no doubt about it, if one analyzes the initial trends. Simply because, the largest cities of the country have scarce areas which can be developed and sold out.

The pandemic has been a blessing in disguise for the industry as the low cost of lending has boosted the morale of developers to finish the pending projects, whereas the buyers have been able to hunch upon the low EMIs to buy new houses. 

Top cities in India including Gurugram, Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Pune are poised for favourable housing sales, sowing the seed for revival of commercial real estate as well.

The changing dynamics in favour of real estate, even amidst the unstable economy, could be attributed to the changing consumer sentiments that underwent modification due to the uncertainties of rental accommodation. Even the millennials are adding to the demand. The new age generation, which relocated from Tier II and Tier III cities to Tier I and metros, is now in the favour of having their own house, instead of renting one. This is also now adding to more demand for the sector.

The new investors or the homebuyers demand spacious houses, with luxury and a large number of amenities, to showcase their lifestyle. Housing is now a style statement and the notorious pandemic instigated parties and gatherings at home only.

Another reason for the demand for the housing sector is the work from home option or the remote work culture, where people will visit their offices, but only occasionally. Installing workstations at home, with more than one working partner, is adding more demand to carry out the activities smoothly.

When remote working culture got adopted unanimously, people were on the lookout for homes with extra room or space, which could either serve as an office or study. As mobility got restricted, people started searching for homes that accommodated entertainment, exercise and recreational areas, which added more demand.

Another reason for the real estate boom is the lacklustre return of other safer asset classes. Barring the volatile equity markets or the unregulated cryptocurrencies, safer bets like bonds, FDs and gold have failed to offer better returns to investors.

With the rise of geopolitical concerns globally and strong outflow of foreign investors, one can assume that the golden days of equity markets are left behind and real estate is poised to emerge a lucrative option for both risk bearer and risk hesitant investors.

Real Estate is an asset class with long lasting value, evergreen utility and security for the future even in the uncertain times. This, coupled with easy financing, has made it a reliable investment for the all, offering steady and solid returns.

Perceiving the revival potential of real estate, the government also came up with progressive policies to give a boost to the industry. The government is focused on the revival of demand in the economy and real estate is a key theme of its infra push. The center aims to provide a conducive environment to encourage home buyers.

Experts estimate that the low-interest rate is there to stay for a couple of years. Thus the home buyers can apply for higher amount loans which broaden their choices to buy bigger homes complemented by enhanced amenities and better lifestyle.

Considering the panoramic view of the industry, the future of the sector seems rather promising. Taking a positive turn, the sales in real estate are expected to reach their peak in a couple of years. - Authored by Shubham Arora, Director, Sheerbulls India Pvt Ltd