Real Estate Market Analysis after COVID-19 Crisis

We all are familiar with how the real estate industry functions. Basically, it works because the value of real estate tends to rise. As a result, people make a profit by buying and selling real estate.

Let’s have a look at the people who create demand for the real estate industry.

• Investor- He invests in real estate for either a rental opportunity or an appreciation opportunity. In other words, he will make money by either renting the property or reselling it at a higher cost.

• End-user- In this scenario, people who buy flats for the sole purpose of accommodation are called end-users.

2020 saw major traction for almost all the sectors. Amidst the major chaos that this year has witnessed, people really want to know whether it is safe to step into real estate. Let’s have a look at how has COVID-19 influence the real estate industry.

Understanding the demand 

a) Immigration/Job Opportunity: There has been an exponential increase in the migration to cities like Chennai, Pune, Mumbai, Hyderabad, etc, due to the increasing job opportunities. Covid has made people realize the importance of owning an apartment over staying in a rented apartment. In fact, post-Covid the rates of flats have dropped down and the sales have automatically pick up. In Pune itself, 40-50% of the people who were staying in a rented apartment have now purchased their own property.

b) Trust on Branded Developers: Covid has also created a demand for branded developers. On the other hand, small-time developers are still struggling to sell their units because of the lack of trust factor.

c) Ready to Move-in: There has been an increase in the demand for ready to move in property irrespective of whether it is a branded or a small-time developer. However, for under-construction projects, people are only relying on branded developers. It is also predicted that in the next 3 to 5 years, the small-time developers who don’ change with time might have to exit the industry.

What do the experts have to say? 

According to some real estate experts, it is definitely a yes to invest in this sector in the coming years. Both, residential and commercial real estate businesses have great potential. The government needs to take quicker and bold corrective measures for the housing and urban infrastructure sector so that there is an immense boost in the demand. Even though the sector has been drastically impacted in 2020, better days are expected in 2021. Amid the growing importance of homeownership among buyers and investors, the demand for residential real estate would be high in the coming year.

Other Investments Vs Real Estate 

As an investor, there are various investment options like FD, Shares, Gold, Real Estate, etc. 1) FD: With current lower interest rate, though it’s safe but not preferred for an investor to settle at 6%-7% taxable interest rates.

Shares / Stock Market: Though returns are very high, the risk is high too and with this volatile market it is not very preferred investment options for all. When compared to the stock market, real estate provides a passive income stream and has the potential for substantial appreciation. Moreover, it is a tangible asset that can be controlled, with the added benefit of diversification. 2) Gold: The gold rate has been on an all-time high making it a “not so lucrative” investment anymore. Also, the fate of gold rates going up and down depends a lot on international borders opening at times. Also, real estate is subject to low volatility as compared to gold.

3) Real Estate: It provides rental as well as capital appreciation as an investment plus have tangible assets with an investor which is more preferred post COVID scenario.

Role of technology in the Real Estate sector 

Lately, developers have seen a spike in inquiries and demands from NRIs. NRIs from USA, Europe, and Asia, including the Middle East, are the most active in inquiries since there’s a high level of economic uncertainty. Asset prices have fallen in these regions and investment opportunities to earn returns have remained negative. Digital tools like virtual tours and walkthroughs allow potential customers to experience the property, understand the details of the complete project, and book it online. Hence, Real Estate firms are now focusing on and adapting to the methods of online experience selling. They have also been training their staff for zoom calls and google meetings. Due to Virtual Reality, NRIs need not actually visit multiple sites. They can view everything from the comfort of their homes. This makes the entire process of purchasing faster and the customer has the time to remain more focused on his purchase.

Role of Covid in the Real Estate boost 

One major takeaway from the pandemic has been the importance of owning a home. In fact, many have learned to judiciously save and spend and this has resulted in them making smart investments in real estate. The industry has seen a rise in the NRI investment in the affordable and mid-segment housing category. The falling rate of the rupee increases the interest among the NRIs to buy a residential property. The time to invest in the most tangible and rewarding asset in a post-pandemic world has never been better.

All in all, it is an ideal model of investment when compared to other modes of investment like the stock market, fixed deposit, gold, etc. The real estate industry might witness a slowdown in the coming year. But post that the market has good potential. So anybody who is investing now can expect a good appreciation with a horizon of a minimum of 3 to 5 years.


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