Real Estate Emerging Top Investment Preference Amid Rising Housing Demand; What Industry Players Say

Even as real estate has gained traction since last year, the sector is emerging as the top pick for investors, according to Anarock’s Consumer Sentiment Survey for the first half of 2023. This marks a notable change from previous years, where gold was the go-to option. The stability in home loan rates, averaging around 9.15 per cent, is a key factor driving this shift towards real estate. According to the report, it has boosted confidence among potential homebuyers, with 98 per cent of respondents noting that crossing the 9.5 per cent threshold would greatly influence their buying decisions.

Rahul Singla, director of Mapsko Group, said, “The Indian real estate sector has seen remarkable growth, fuelled by factors such as RERA implementation, improved infrastructure, and lower home loan interest rates. By 2040, the market is predicted to have grown to the tune of Rs 65,000 crore, making a significant contribution to the country’s gross domestic product. The current climate is ideal for real estate investments since the world’s attention is increasingly being drawn to India.”

The survey report also highlights that most people (67 per cent) are looking to buy properties for personal use. This reflects a desire for stability and security in uncertain economic times. However, high inflation is a challenge, affecting the disposable incomes of over 66 per cent of respondents, compared to 61 per cent in the previous year’s survey. This shows that more individuals and households are feeling financial pressure, underlining the importance of making wise investment decisions.

According to Sandeep Agarwal, Chief Financial Officer, Elan Group, “Real estate investments usually yield returns that markedly outperform inflation, leading to substantial financial gains. This asset class offers a potentially high-income stream with comparatively lower risk when juxtaposed with alternative investments like direct equity, courtesy of its well-structured legal framework that serves to diminish the likelihood of fraudulent activities.”

Looking at the demographics, 52 per cent of millennials and 35 per cent of Gen-X respondents plan to use gains from other investments to buy homes in the future. This signals a strong desire for homeownership among younger generations.

Vivek Singhal, CEO of Smartworld Developers, said, “Homeownership has evolved as a priority buy and a sign of collective pursuit of stability and security. The Indian real estate sector currently offers a lucrative investment opportunity marked by high rental yields coupled with long-term capital appreciation. Today’s financially astute generation meticulously weighs the merits of diverse investment avenues.”

He added that millennials, in particular, wield significant influence in the realm of home purchases, a trend projected to persist in the years ahead. This demographic, especially in the post-pandemic landscape, constitutes a substantial portion of homebuyers, debunking initial assumptions that this surge was solely fueled by the WFH trend.

Despite rising property prices and increased interest rates in the past year, the survey finds that 59 per cent of homebuyers are still committed to mid-range and premium homes, priced between Rs 45 lakh and Rs 1.5 crore. This represents a 10 per cent increase in preference for homes in this budget category since 2020.

Shashank Vasishtha, executive director of eXp Realty India, said, “The current real estate scenario in India unveils a unique window of opportunity for both investors and prospective homeowners. The preference for mid-range and premium homes mirrors a clear demand for quality and value in the market. Exploring emerging markets may provide investors with a distinct competitive advantage.”

Vasishtha added that the stability in home loan rates, combined with the effective implementation of RERA and improved infrastructure, has played a pivotal role in bolstering confidence among potential buyers. Moreover, the projected market growth to Rs 65,000 crore by 2040 serves as a promising indicator of the upward trajectory in property values, presenting ample opportunities for those considering entry into the real estate market.

This shift is driven by factors like stable home loan rates, growing interest in Fixed Deposits (FDs), and a rising aspiration for homeownership among millennials and Gen-Xers. Despite economic challenges, the real estate sector shows resilience, providing a stable option in uncertain times.