There is no debating the adverse effects of the 2020 Global Pandemic on the economy. Multiple companies have shut down and others have had to drastically reduce their overheads while few have had to lay off multitudes of workers. On the other hand, people who have kept their jobs have found themselves with a decent chunk of disposable income owing to not having many avenues to spend during the pandemic. There is no travel, offices have encouraged work-from-home policies, and restaurants and pubs, though open, are still not seeing the same attendance they once used to.
Yes, the national debt is at an all-time high due to the unprecedented number of layoffs and lack of opportunities but the ones who have maintained their income are looking to invest rather than let the money stagnate in their accounts. A study was conducted by 99acres to gauge the average person’s view of safe investments. It revealed that 31% of people still looked at real estate as the safest form of investment followed by fixed deposits at 24%, gold at 23%, and the stock market at 20%. Remember that these studies are conducted based on surveys taken from both common laymen and industry experts.
There is no particular reason that a simple survey should give conclusive answers to such a large financial decision. However, when one looks further into the real estate market of 2020 some more factors come into play. Let’s keep focusing on the buyer for now. In a survey conducted by ANAROCK, 42% of people who were planning to own a house in January 2020 have abandoned those plans in the wake of the Covid19 pandemic. This is understandable as the uncertainty of the market, as well as job security, may have affected the decisions of the 42%. But what of the 60%? For some reason, the majority of people are still looking to go ahead with their plans for homeownership.
Consumer behavior is a term that almost anyone and everyone in the construction will be well versed with. It is the one thing that offers a bird’s eye view of the real estate market potential. Simply put, buyer sentiment is a measurement of the average desire for purchasing or owning a specific item. This is recorded with an incredibly large amount of data and conducted surveys. It should go without saying that buyer sentiment in the real estate market around the world is worse than it has ever been. A survey done by NAREDCO (National Real Estate Development Council) in association with FICCI and the consultancy Frank Knight showed that users were happy to go ahead with their house construction in Oct-Dec 2019 but that sentiment fell by almost 30% in the first three months of 2020. This was a historic low for the survey. Furthermore, the stock market has expectedly not given favourable returns this year crushing any willingness to take up any risky investment no matter how small the risk.
Where then is the silver lining?
Let’s come back to the 60% that still intend to go forward with their intentions of owning a home. First, let’s understand that 60% is a majority of people surveyed. This means that the majority of people in the market for a home think it’s a good time to go ahead. Were the people in this number specifically of a certain income bracket then the same would have been mentioned rather HIGHLIGHTED in the report. However, there is no indication of the same which means that this 60% is not necessarily loaded with disposable income. Yet, the majority of the Indian real estate buyers are still moving towards their investment. Chairman of ANAROCK Anuj Puri said-” It is not a very good time for those who want to buy homes for the sake of investment. Prices are unlikely to rise in the short-to-mid-term and rental yields remain unattractively low at 2.5% to 3%.”
While rental numbers are expected to rise come 2021, the takeaway here is that a large number of people in that 60% are people who wish to own a home to live in, not rent it out. The pandemic has shown a large populace that renting is anything but a viable option during a crisis. This would also explain the sudden surge of millennials switching from renting to owning as their generation was the worst hit during this pandemic. People have suddenly realized the disadvantage of having accommodation that is directly dependent on monthly income. A large number of landlords have even been contacted by their tenants inquiring into purchasing the property they are currently occupying.
But the biggest reason for this optimism in real estate and construction industry is coming from the primary regulator of this market. — the government and reserve banks.
The central government recently passed a waiver over compounding interest that was payable by borrowers who had opted for a moratorium on their loan equated monthly installments between March 1, 2020, and August 30, 2020. The central government had also filed an affidavit seeking a waiver of interest on loans up to Rs. 2 crores albeit for a select category of borrowers that had a CIBIL score over 750.
The cherry on the icing, however, is the interest rates of banks for the people who aren’t eligible for a waiver. As mentioned in our previous blog, real estate loans are looking at interest rates that have never been lower. With the RBI’s knack for reducing repo rates in the past, home loan interest rates have plummeted. With an all-time low in interest rates, monthly installments have slashed and become more approachable to borrowers. The 60% of still-interested buyers are aware of this. Coupled with the fallen bargaining power of real estate developers and builders, there really isn’t a better time to buy a house.
Owning a home or building one is a large investment and should involve a stringent amount of thought and deliberation. Luckily at Housejoy, we do the thinking for you when it comes to constructing your dream home
Still unsure? Call us now to schedule a meeting with our in-house experts.