Real Estate Emerges as the Most Preferred Investment Option

Due to the volatile nature of stocks and mutual funds and turmoil in the equity markets, real estate has turned out to be the most preferred investment for the Indian investor. Anarock’s recent consumer sentiment survey for H1 2019 indicated that a majority of over 57% voted for real estate as their favourite investment. The survey was conducted by Anarock Property Consultant in the first quarter of 2019 and received 2,797 responses from across income levels, age groups and geographies.

The key reasons for investors favouring property over other investments are, attractive prices, better regulation (RERA), low home loan rates and other reasons. The attractive discounts offered by builders to clear inventory eventually has led to an increase in sales. Better regulation under RERA was also a big reason for the improvement in consumer sentiment. According to the report, sops announced by the government, reduction of GST rates for under-construction properties and correction in property prices have combined to boost investor sentiment. These three factors have had a cumulative effect on the real-estate industry in India and drive the rise in demand for real-estate investments.

Real estate investment is the purchase of a future income stream from property and can offer several advantages over other types of investments, including potentially higher returns, stability, inflation hedging, and diversification. Real estate has additional benefits such as its ability to both increase in value as well as produce cash flows from rental income. Real estate is also the most preferred investment asset class for high-net-worth individuals. According to Hurun Indian Luxury Consumer Survey 2019, As many as 31.07 percent of respondents believe that their investment allocation towards real estate sector will grow in the next two years.

Residential Real Estate Emerges as the Winner

Residential real estate is a dynamic investment option in India now. Backed by government sops, affordable housing can feasibly give returns to the tune of 8-10% in the long term. There are also a number of alternate residential real estate investment options – including serviced apartments, senior living, Smart City-based housing, and eco-living. The monthly rental ROI for these residential sub-categories is a lot higher.

Much depends on how well-informed is an investor of the rapidly-changing Indian housing market. In an Economic Times interview, eminent banker Deepak Parekh has also said a number of new growth drivers are emerging in form of student housing, retirement homes and co-living projects. He also said foreign investors have also been investing in a big way in good commercial projects, while warehousing is another segment where they are showing keen interest.

Urbanization has created a huge demand for new construction, especially in the residential market, because more housing will need to be constructed to keep pace with the rapidly increasing population. This has created a good market for those seeking to invest in in a property for rental purposes; as they ensure good rentals on a regular basis. In the high-end rental apartment segment, the terrace flats, luxury apartments and home, bungalows, villas, penthouses and condominiums are gaining ground as a popular choice.

South of Gurgaon has emerged as a lucrative investment option for end users as well as investors. The area boasts offers good connectivity to all the major cities in NCR and offers the same amenities you may get in Gurgaon. It has a lot of affordable home options along with many luxury residential properties in Gurgaon. The outsourcing industry in Gurgaon hires more than 5 lakh people and nearly 2 lakh workers are employed by Maruti and Honda factories leading to increase in the demand for homes in Gurgaon and nearby areas. An investor can have a steady handsome rental income if you rent out your property in south Gurgaon. The property prices have gone up from 10-15% in the last few years and will only be moving upward from here on making it clear investing there would be a wise option.

Commercial Real Estate Beckons Investors

Today, more investors are eyeing commercial properties and sectors like warehousing. Also, REITs (Real Estate Investment Trusts) have finally kicked off in India, and commercial real estate is attracting a lot of attention from real estate investors. Commercial real estate has become a hot favourite among investors on account of demand for high quality office and retail space in the past few years. Some of the other segments that are expected to gain are warehousing, co-working and student housing.

With the rising demand for office spaces, particularly grade A offices, the future of commercial segment looks promising. IT/ITes, banking, engineering, IT parks, logistics centres, and manufacturing sectors continue to be the largest occupier of office space. The rising lease rentals and high absorption rates are reason behind the escalating demand for such spaces in Delhi-NCR. Grade A office space in a well-located place generates great returns. Backed by favourable policy environment and expanding workforce, office space segment is expected to witness healthy leasing momentum in coming years.

“Increased supply and demand for Grade A office space, relatively affordable rentals as compared to similar global counterparts and the new availability of exit option via REITs has boosted focus of the PE players on commercial property, “said Anuj Puri, chairman, Anarock. “Retail (which is a part of commercial real estate), backed by a healthy economy and liberalisation in policies, has also shown signs of emerging as a favoured choice for PE investors,” he said.

Availability of high-quality office space at reasonable rates has helped commercial properties in Gurugram score. In addition to the cost advantage, proximity to the airport is another attraction. The price performance in Gurugram has been unlike other cities. Golf Course Road has a large number of infrastructure projects coming up on the stretch. Due to continued infrastructure development, Golf Course Road and Golf Course Road Extension will remain hot residential Premium office occupiers continue to prefer Cyber City, Golf Course Road and NH 8 owing to their enhanced connectivity. Similarly, the state government’s efforts to decongest the Gurugram-Alwar highway should make commuting easier.

Sources:

https://economictimes.indiatimes.com/industry/services/property-/-cstruction/student-housing-retirement-homes-co-living-new-realty-growth-drivers-deepak-parekh/articleshow/71406152.cms
https://economictimes.indiatimes.com/wealth/real-estate/most-investors-prefer-real-estate-says-survey-really/articleshow/71347430.cms
https://www.moneycontrol.com/news/business/real-estate/real-estate-and-stock-market-most-preferred-personal-investments-for-hnis-hurun-report-4389061.html
https://api.anarock.com/uploads/research/Indian_Residential_Real_Estate_Consumer_Sentiment_Survey_Report_H1-2019.pdf