Real Estate Sector in 2020: The Opportunities in Hindsight

Posted on 2020-11-05
Real Estate Sector in 2020: The Opportunities in Hindsight

The ongoing COVID-19 situation has lent a severe blow to most economic activities, impacting industries across the board. Real estate has been one of the hardest hit sectors by the pandemic-induced crisis, but on hindsight, it has been observed that despite the damage caused, every crisis presents opportunities to think out of the box, survive and thrive. The COVID-19 crisis is no different.

Amongst its several lessons, the pandemic has made people prioritise the need for owning a home. With the economy slowly re-opening, and the government and developers offering a host of incentives, people are re-thinking their investment portfolios and real estate seems to have garnered a status of a safer and stable investment. With the lockdown easing, many industries will resume activities with adequate social distancing, as will the real estate sector. While there are apprehensions about how things will unfold, particularly on the employment front, there are multiple factors that determine real estate as a lucrative asset class for investment at this point of time. Here’s looking at a few:

Technology reshaping the sector – Technology has come to play an important role in the areas of construction and facilities management, although the shift is more perceptible towards marketing and sales front. With the lockdown hampering site visits, developers and brokerage firms have re-aligned their businesses to digital platforms. For buyers’ convenience, developers have started to create hassle-free digital platforms to purchase a home without the need of visiting the actual site, thus easing the entire home-buying process. This would eventually lead to an efficient and transparent buying process, enabled by technological advancements.

Schemes and offers aplenty - Developers today are offering various schemes and relaxed payment options to make it easier for buyers to invest in residential property. Several freebies are also being offered in order to entice the buyer and bolster sales, thus easing the issue of inventory overhang. With options such as ‘no EMI till possession’ and ‘booking a home with just 10% down payment’, this is probably an ideal time to negotiate with developers.

Demand and supply favouring ready units - The combined impact of the pandemic-induced financial uncertainty and increased need for home ownership has led to a growing demand for ready-to-move units. Unlike pre-COVID-19 times, developers at present have a fixed objective of completing their ongoing projects and selling out the ready units, thereby catering to the demand of the buyers. Thus, there could not have been a better time in the real estate sector where the demand and supply are so perfectly aligned.

Favourable home loan rate - The current market conditions are conducive for home buying as the home loan interest rates are at an all-time low. A decrease in home loan interest rates post COVID-19 has become a big trigger for end-users and investors alike to buy a home.

Attractive proposition for NRIs - Given the present conditions, it can be considered to be a fair time to invest in high-end property as factors such as rupee depreciation, low interest cost and prices bottoming out have created an attractive proposition – persuading the NRI populace to look forward to retain a property of their own. Most importantly, the buyer has the advantage of time at this juncture – he can ponder and analyse his buying decision, secure in the knowledge that his options would not be snapped up in a slow market. Also, with the aid of technology it is now more convenient to evaluate a property online, circumventing the issue of not able to visit the country on account of travel restrictions during the pandemic. Going forward, NRI contribution in the residential market stands to strengthen, provided the market remains attractive to the buyer.

Transition in commercial workplace – With strict precautionary practices due to COVID-19 scenario most organization will look towards occupying bigger office spaces or multiple smaller ones to ensure compliance with social distancing norm, thereby increasing the demand for office spaces in the medium term.

REITs as a viable investment instrument - It has been observed that, given the volatile nature of most other asset classes, particularly during such testing times, real estate is turning out to be a prudent bet and a strong hedge against market volatility for most investors. With several key factors, such as the economic growth of the country - expected to revive substantially in Financial Year 2021-22, the presence of a strong middle-class populace and a continual need for commercial spaces in employment hubs - we believe that the market for investment instruments such as REITs will observe significant growth in the forthcoming period.

Thus, considering the points mentioned above, we can conclude that combination of all these factors depict that positive sentiments would gradually regain momentum in the realty market in the forthcoming period. Besides, the introduction of numerous government relaxations in the COVID-19 backdrop makes property buying more lucrative in the current landscape, affirming that 2020 could be considered to be an appropriate time to invest in the real estate sector of the country.

Commercial Real Estate, Industry Updates, Redevelopment, Technology.
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