By Invitation: Saurabh Runwal, Associate Director, Runwal
The Real Estate sector had witnessed a major drop in prices in the initial stage of the lockdown. There were limited buyers at that time and hence the demand for properties was also low. In the unlocking phases when things started to normalize eventually, there was a rise in demand in the housing real estate space. The sale in properties in the metro cities witnessed a gradual rise with 29,520 units being sold in Q3 2020, whereas 45,200 units were sold in the pre-COVID-19 quarter of Q1 2020, of which Mumbai observed maximum sales of 9,200 units. The rise in demand was a key indication that this sector would prove to be safe and trustworthy to invest.
With a rise in demand, the revival in this sector is still ongoing and would still take some time. But there are a few schemes promoted by the Government which is benefitting home buyers. The provision of the exemption of 20 percent differential value between the market value and circle rate from income tax, which was only 10 percent earlier has provided much relief to most of the home buyers. Moreover, under the Pradhan Mantri Awas Yojana Urban (PMAY-U), the Government has also allocated additional funds worth Rs. 18,000 crore. This move will result in more homes for home seekers and also help generate employment opportunities. Apart from the Government initiatives, the best part for buyers is that the home loan interest rates are below 7 percent, and the rebate against home loan interest payment is high at Rs. 3.50 lakhs per annum. A situation of this kind has occurred after several years where the property, as well as interest rates, are low. Thus, with these opportunities in hand, the buyers are planning to make the most out of it and have started investing in the residential space.
Safe Investment Option: The real estate sector started gaining more confidence post the unlocking period than ever before. Apart from people who were interested in buying homes, there were a lot of people who started investing in homes with a view that it would give high returns in the future. As prices were slightly low and interest rates being below 7 percent, the ones that could afford to, have invested in second homes. As all activities have started resuming and people have moved to cities again for work, the demand for rented apartments has started seeing a gradual rise and the ones who had invested in properties will generate a secondary source of income from renting apartments. The trust in this sector is rising in the minds of people that the ones investing in gold have started shifting towards investing in properties.
Metro cities like Mumbai have the trend of people migrating and coming to reside permanently. Due to this, more and more builders are coming up with projects in metros and the prices remain high, compared to Tier-II and Tier-III cities.
During the Covid-19 phase, when the property prices are low, a few potential buyers must take the opportunity to buy secondary residential spaces. When property prices reach to pre-Covid levels over a period of few months, they may choose to sell it. The ones not able to afford properties in prime locations, can lookout for investing in the outskirts of the city where the prices are comparatively low. Mumbai being a densely populated city, where more and more people are migrating each year, has shown development in the outskirts of the city as well. These regions are soon going to be developed and property prices are going to see a rise further. The right time to invest is now in these regions as in a span of few years, the properties will provide a high rate of returns.
With the Government benefits, low property and home loan interest rates, the housing sector is the best option to invest in. As things normalize, people are going to benefit from its high rate of return.