A Positive Picture for Property Investors
Anarock Property Consultants conducted an online survey in early 2019 which showed that close to 60% of participants prefer to make investments in real estate. The survey covered 2,797 respondents from various income levels and geographic locations as well as from diverse age groups throughout India. Respondents from the Bengaluru region were found to be the most optimistic about property as an investment with as much as 67% listing this as their preferred investment vehicle. This was followed by Hyderabad at 64%.
Motivation Behind Property Purchases
Buyers who purchased property in the past year were asked what their main reason behind the purchase was and the results were as follows:
- Fair and affordable pricing: 50%
- Improved regulation: 22%
- Reduced home loan rates: 20%
- Other: 8%
Additionally, the upheaval in the equity markets on top of plummeting interest rates may also be playing a significant role in the increased investment in real estate.
The Role of RERA in the Property Market
After the Indian Real Estate Regulation Act (RERA) was introduced, property sales and prices plummeted. While this was a serious obstruction to property developers, builders began offering attractive discounts with the goal of clearing inventory and this eventually resulted in a rise in sales the next year. RERA was eventually plugged as a major reason for the improvement in consumer sentiment.
Does This Mean That Real Estate Is the Best Investment Opportunity Available?
Although the numbers paint a positive picture, the real estate market in India may not be the best investment. The RBI House Price Index in India registered a CAGR of 7.3% in a period of five years. When compared to returns from equity over a similar period, it’s clearly not equivalent. For example, Nifty achieved a growth rate of 11.5% and nearly doubled in value over the same period of time. Incidentally, gold only gave a 4% return and is beginning to become known as a dead asset that is only attractive to those who are not aware or have access to other financial asset classes.
Exploring the Purpose Behind Property Purchases
According to the survey, 58% of property purchases were made with the goal of end-use, whereas 42% stated that the purchase was made purely for investment purposes. Of those purchasing with the goal of investment, 53% hoped to earn rental income, 39% plan to sell when the market improves, and 8% see the purchase as a potential future asset.
Further Findings
When asked whether they are happy with property investments made in the past five years, 62% of the respondents responded positively and 38% negatively. Anarock further found that investor sentiment is boosted by government-announced SOPs, the correction of property prices, and a reduction in GST rates for properties currently being constructed. Despite challenges faced by the industry, house sales in major cities increased by 18% and new launches increased by as much as 33% in 2018. The survey revealed that reduced property prices were the biggest influence behind these numbers.
