Impact of coronavirus - Is it right time to invest in property?

23 September, 2020
Impact of coronavirus - Is it right time to invest in property?

Impact of Coronavirus: Is it the right time to invest in property?

Every industry went through a difficult time in the first few months of the ongoing pandemic and real estate was no exception, facing its share of challenges. As a sector that is one of the biggest contributors to the nation's economy, it was surprising when it came to a screeching halt with zero construction work and an unprecedented fall in sales owing to the lockdown measures. But after the first lockdown got over and work picked up gradually, the demand for residential property too, started getting back on track. This was observed with the increasing demand for ready to move homes, and the residential property market too started its path to recovery.

According to a recent survey conducted by the Anarock Group, 92 percent of the respondents stated that they would like to have a physical asset during these current times. This hints at the fact that the pandemic has reinstated the sentiment of ‘physical property having a sense of security’, and thus bodes well for the residential market in the coming times.

But the question is - Is it the right time to buy a house? Is this the right time to buy a property?

The answer is an overwhelming yes!

  1. Preference over other assets: In recent times, real estate has proved to be a less volatile asset class as compared to others. Residential property is perceived as the safest and long-term investment, having value for money because real estate was the only investment option that survived the pandemic without exhibiting potential loss to its investors.
  2. Corrected property prices: The prices of residential properties are at an all-time low during this time. And this has happened due to various factors like the need for liquidity by developers, to induce confidence in the market and to motivate buyers after a substantial loss in their discretionary income. All this has led to price corrections of residential property. The luxury sector has also witnessed a price cut of around 10-15 percent. The price correction is expected to continue owing to the need for cash flows in the market.
  3. Further offers to meet affordability: Along with the attractive market-level price corrections, developers on individual levels are trying to lure home buyers by providing them with deal making offers on residential properties. The developers are mainly focused on presenting their offers to be pocket friendly and risk-mitigating by allowing them flexible payment plans.
  4. Power to buyers: Before the pandemic, the market was more supplier enabled - costlier valuations, declining loan to value ratios (LTV), interest rates touching the skies. But the post-crisis scenario is more in favour of the buyer. Currently, the market is demand-enabled as the growing urge to own a home revived the market. And to acknowledge and promote this market-friendly sentiment, many factors affecting the purchase have been corrected in favour of the buyers.
  5. Government policies: Real estate sector is the largest employment generator and an equally significant contributor to the economic health of our country. So, when the opportunity of 'growing residential property demand' showed itself, the government put all its efforts to revive the sector by supporting this market sentiment with various policy relaxations. Easing of interest rates on home loans, new solutions under PMAY scheme, softening the tiresome processes of home buying through digitization and various other micro and macro policy reforms have been undertaken to support the sector.
    • Home Loan rates - The Reserve Bank of India (RBI) has also been reducing the repo rates on multiple occasions, leading to plunging home loan interest rates to sub -7% levels. This is not an opportunity to let go off. These record-low interest rates have the potential to provide you with once in a life-time home buying offer.
    • Foreign Direct Investment - Along with motivating domestic investors, the government helped developers to lure international investors by allowing 100 percent investment for specific developmental projects like housing, townships, new construction projects and built-up infrastructure. So, is this the right time to buy property in India for foreign investors? Indeed, it is!
    • Reduced stamp duty - The government of India urged all the states to adopt relaxations in the stamp duty to boost the residential property demand. Following which we saw Maharashtra reduce the stamp duty by 3 percent on property registrations for seven months, setting an example for other states to follow the same. Other cities like Delhi, Noida and Gurgaon now have rates between 5 percent and 7 percent, whereas cities like Chennai the rate is 7 percent. In the other cities in South India, the stamp duty rates are between 5 percent and 8 percent range. And in a few states of north India, the rates are more economical if the property is registered in the name of a lady/ woman. This reduction is in the range of 1 percent – 2 percent. This initiative by the government is expected to accelerate the momentum of residential property sales further.

Thus, because of the above-mentioned reasons it seems to be the ideal time to make that purchase for which you have been waiting for this long. Currently, for a buyer, the market is favourable through 360-degree angle - from all aspects. Be it price, discounts and offers, type of residential property, government policies, ease of processes, it is favourable from all aspects. So yes, it is the right time to buy a house, a property!

Every crisis teaches us to think out of the box, learn new ways to survive and thrive. And so did the coronavirus! We did face the difficulties, but we also came together across new ways to survive, earn, live and keep the dice rolling. Welcome to the new normal!

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