Now is a favourable time to invest in real estate, say experts- The New Indian Express

Express message service

NEW DELHI: Low interest rates and incentives offered by state governments and property developers have helped the Covid-hit real estate sector recover from the lows of the initial lockdown, when quarterly sales (Q1FY22) fell over 90% year-over-year .

For those buyers who can afford it, the crisis has become a great opportunity to upgrade to larger rooms or diversify their investment portfolio by buying properties at very affordable prices.

With supply plummeting due to rising demand, soaring commodity prices and impending interest rate hikes, industry participants believe that these are the best times to invest in residential real estate.

“This is a good time to buy real estate, especially for end users looking to buy their first home or move to a larger house. Real estate prices are cheap, home loan interest rates have been low for decades, there are many options for both ready-to-move-in and under-construction properties, ”said Saransh Trehan, Managing Director of the Trehan Group.

Anuj Puri, chairman of the real estate advisor Anarock Group, also believes that this is actually the right time to buy a property, especially for those who want to use it for their own use, as the prevailing interest rates have been at a decade-long low and the affordability The best of homes ever plus property developers are continuing to hand out various offers and discounts on many of the residential projects.

Currently, most banks offer home loans at a starting interest rate of 6.60-6.70%.

Price increase is inevitable

In view of the constantly increasing input costs for basic raw materials such as cement and steel, the developers are now considering increasing the prices, according to Puri.

For some residential projects, prices have already risen by up to 10%, he adds.

The Reserve Bank of India’s recently released Quarterly House Price Index (HPI), based on transaction data obtained from housing registries in ten major cities, found the HPI to grow 2.6% across India in Q2 2021 (yoy) posted -22 compared to 2% growth in the previous quarter.

Trehan says that rising input costs are eating up the developers’ already very low margins.

“In recent years, acquisition costs have increased nearly 20% and developers are reluctant to pass the increase on to homebuyers. A 10-15% increase in real estate costs is inevitable, ”he added.

According to industry participants, the cost of building materials, especially cement and steel, has increased 40-50% and is showing no signs of slowing.

Puri adds that over the past year (amid offers and discounts) many developers have seen their holdings cleared after the surge in housing demand during the pandemic, giving them an opportunity to raise prices.

Demand for return

The most recent release from real estate advisor CBRE, India Market Monitor Q3 2021, highlighted that due to a persistently attractive mortgage system and government incentives, home sales rose nearly 46% to 50,000 units in the third quarter of 2021 and rose about 86% year-to-date Year-on-year have recovered significantly (YTD) basis.

Therefore, despite disruptions and market dislocations during the pandemic, the housing sector has shown itself to be resilient – with good prospects.

According to market participants, the expected robust demand can bring a noticeable return on investment in real estate, since real estate prices can only be expected to rise.

This sector, known for its poor returns, has remained a weak zone among investors for a long time.

Puri explains, “If we take current trends into account, anyone who invests $ 1bn in a prime location in one of the top cities can see at least the average. 25-30% total return on investment over the next five years. The return will likely be more than 50% in 10 years. However, a lot depends on the type of property, the location, the type of client, etc. ”

However, this return is likely to be significantly lower than with investments in blue-chip stocks, another safe investment zone. In the current bull run, the benchmark indices – Nifty and Sensex – achieved a return of 29% in just one year!