Non-resident Indians (NRIs) have always maintained a love-hate attitude when choosing real estate as an investment option.
Interestingly, proving most investment advisers wrong, a CII-Anarock consumer sentiment survey, which assessed investor behaviour during the first and second waves of covid-19 pandemic in India and their impact on investment decisions, found that roughly half of respondents consider real estate to be the best asset class.
Buying a home and saving for emergency funds were the two major factors influencing investors who chose asset classes other than real estate.
During the second wave investors were far better prepared, compared to the first wave when there was subdued investor confidence.
Investor confidence in real estate has increased as 54% participants showed confidence in the sector during the second wave as against 48% during first wave.
Stock market also remained attractive for 34% of investors during the second wave as compared to 24% in the first. Gold and fixed deposits as an investment class have become less lucrative.
Home loan rates lowest
Prevailing lowest-best home loan rates has been a major factor driving home sales despite the pandemic. At least 82% of respondents consider low home loan rates as a major positive factor influencing their property purchase decision amid the pandemic.
“Coupled with the conducive market sentiment, home loan rates are hovering around one of the lowest rates in recent times. Lenders are engaged in a rate war to attract home buyers, both NRIs and residents, to the benefit of investors,” said Ashumol P Kumar, Mumbai-based legal and property consultant and lawyer practising in Bombay High Court, India.
Home ownership became a compelling reality, accelerated by pandemic-like exigencies, developer offers and discounts, and prevailing lowest-best home loan rates. Altogether, affordability of homes was optimum across Indian cities in financial year 2020 at 27%, leading to significant surge in overall housing demand.
Penchant for premium
An overwhelming majority (82%) of NRIs surveyed now prefer to buy premium to luxury residential properties in their home country, a major change from the past, which is widely seen as a reflection of the increased belief that the trend of working from home is here to stay, the survey said.
In a trend reversal, a higher percentage of NRIs want to buy houses in India for self-use, as opposed to acquiring property as an investment.
At least 53% of NRI respondents in the survey said they would buy properties in India in the coming months for end-use, while 47% said they would do so for investment.
Gulf-based NRIs account for a large part of expat property buyers in India due to issues related to long-term job prospects and residency visas in many Gulf countries, as against their compatriots in Western countries like the US, UK and Europe who generally settle with green cards or permanent residency permits.
Bigger is better
The survey also revealed NRIs’ penchant for bigger homes. At least 48% NRI respondents preferred larger homes of three-bed rooms, while 24% wanted 4-bedroom or higher configurations. Only 28% favoured two-bedroom apartments, which have covered areas below 1,500 square feet.
Nearly 60% of the overall home buying process has gone online and social media has emerged as one of the biggest platforms for attracting target customers. Online home sales are already beginning to gain traction and leading developers with good online presence will be the main beneficiaries of this change.
Demand for premium properties — priced above INR 9m (£88,458, $119,982, €103,970) — is also at an unprecedented high. The possible factors influencing this change could be the prevailing all-time low home loan rates coupled with developer discounts and offers.
Outlook positive
NRIs will be justified if they keep a positive outlook. While a new peak may not be attained immediately, it is anticipated that the housing market is likely to attain a new peak by 2023 with housing sales crossing the 317,000 units mark and new launches over 262,000 units.
With the second wave receding since June, residential activity has picked momentum. Genuine buyers are back exploring options. It is anticipated that 2021 to be a year of slow retrieval and measured growth that will set the pace for an aggressive momentum in the new decade.
