Notwithstanding the broader economic shocks on account of Covid-19, real estate and land as an asset class for investment remains as attractive as ever. Nearly all segments including office space and residential markets have exhibited impressive performance in the recent past. In fact, in most recent estimates covering the period between July and September 2021, the number of new housing units surged by a whopping 228% YoY across the top eight cities in the country. This also illustrates the promise that the sector continues to hold from an investor standpoint, big and small alike.
Realty the fastest way to grow wealth
Although the realty value takes longer to multiply today as compared to the pre-pandemic period – takes about 6/7years to double unlike earlier 3/4 years – the sector remains the fastest route to generate and grow wealth. For instance, for a property taken on loan today, it’s valuation in a matter of 4-5 years would have shot up 1.75 fold to 3 fold far outgrowing and outpacing the rate of interest on loan that a homebuyer would have had to repay. Eventually, the investor or the homebuyer would end up with a neat profit of about five – six times of what he would have originally put in as his contribution after leveraging from a financial institution even after accounting for all loan principal and interest repayments. This amounts to substantial and investible surplus, not achievable even after a good 15-20 years of conscientious saving. Moreover, if the investor continues to invest in this same asset class, namely, real estate, he stands to save further by not having to pay capital gains taxes.
Pandemic has made realty more promising
Contrary to popular perception, the pandemic has made the real estate sector even more attractive for investment. This is for two reasons. One, there has been a price correction in the industry with rates matching the supposedly dull market sentiment and the builders choosing cash liquidity over inventory stockpiling. And two, banks have been helpful by way of rolling back interest rates to approximately 6.85-7%, a phenomenon unseen in over a decade. With offers of flexi-payment schemes to attract takers, the investment entry threshold has been an all-time low.
A jump in property rates likely in next 6 months
However, from a builder’s point of view, running a real estate business is getting dearer with each passing day, with the cost of input materials such as steel, cement etc …….