Real estate has been considered to be one of the best forms of investment and owning a property has been a dream of many. The property is an appreciable asset, earning the buyer a high return once they are sold. This feature of real estate has made it more attractive and highly interesting. Earlier issues of high capital requirements for real estate investments have also found solutions in the form of crowdfunding, fractional ownership, etc. Thus, now those wishing to invest in real estate but have smaller capital, are also able to invest in big projects through these investment options.
The emergence of the pandemic has affected the world at large. India and its real estate market were no exception. Despite the challenges brought in by the pandemic, the real estate sector saw an increasing demand for residential spaces. With the lockdown restricted site visits, the technological impact on real estate has also started growing. The new trend of ‘work from home has also been instrumental in people realizing the importance of investing in residential properties and this has further led to the increasing demand.
A recent survey by one of the top leading platforms observed that there is an increase in property sales due to high demand. It also stated that the increase in property sales has been a result of the high interest portrayed by the homebuyers in owning a home of their own rather than living in a rented space. The survey was conducted with the help of 100 builders to understand the property purchase trends and the sentiments of homebuyers in the present reality market scenario.
Property Sales in India
Despite the drawbacks brought in by the pandemic, the Indian real estate market saw an increase in property sales as people preferred to own their own homes rather than renting. A recent survey conducted by a leading real estate portal recorded that 84% of the survey participants affirmed that the second half of the year 2020 registered a higher number of sales in comparison to the sales figures in the second half of 2019. Some of the main factors which have contributed towards the high interest in property sales include:
The discounts granted by the builders have been instrumental in driving the demand for real estate property in India. This was further affirmed by the builders that participated in the survey as 75-87% of them believed that the increased interest for property sales resulted from the discounts offered by the builders. Out of the 100 participants of the survey, it was observed that around 53% of them had given a discount of around 0-5% on their properties while 40% of them granted an extended discount of 5-10%.
Reduced Stamp Duty
The survey conducted by the leading portal stated that the reduced stamp duty has also made the properties more accessible and thus has been successful in evoking consumer sentiments. The respondents of the survey also stated that the government of Maharashtra was the first to introduce the temporary reduction in the stamp duty charges and this has brought in changes in the demand scale for real estate investments. The charges have been reduced from 5%-2% until the end of December 2020 and have been changed to 3% till the end of December 2021. A further reduction as given on the stamp duty on account of International Women’s Day to all the female buyers until 31st March 2021.
The stamp duty reduction was granted across all budget groups and this has been a successful model as the state recorded an increase in sales in its top real estate markets such as Pune and Mumbai. The city recorded property sales worth Rs. 34,000 by the end of 2020 which was even higher than 2019.
Following the measures taken by the Maharashtra government, several other states have also started to reduce the stamp duty to support the real estate industry. An example of other states following stamp duty reduction measures includes the Karnataka government. However, the Karnataka government has only granted a reduction in stamp duty for properties belongs to the category of Rs. 35-45 Lakhs.
Reduction in home loan interest rates
Another major factor driving real estate demand is the reduction granted on the home loan interest rates. The RBI has reduced the repo rate due to the pandemic and the lockdown. This has proved to be a blessing for homebuyers as loans were made cheaper than before. The repo rate has an indirect impact on the interest rates changed on home loans according to the MCLR system, as the marginal cost of the fund is included in the cost of borrowing. On the other hand, any change in the repo rate will have a direct impact on the home loan interest rates according to the RLLR model. In the last year, the repo rate has been cut by triple digits and this, in turn, has led to the reduction of the home loan interest making it more affordable. Thus, the reduction in the bank loan interest rates has made the pandemic one of the best times to invest in the real estate sector.
Builder discounts, stamp duty reduction, and bank loan reduction have played a vital role in reviving the real estate market. The pandemic has also been changed how real estate transactions in India are carried out. The real estate sector has witnessed a growing impact of technology after the pandemic as online became the new normal. More and more people have started viewing properties online and builders have started providing 3D site visiting through online modes.
Potential buyers and their demands
The survey conducted by the leading portal also recorded that the pandemic has brought in changes in the working culture. It also stated that the potential investors, especially the millennial which comprised those between the age group of 30-45 (according to the participants of the survey), prefers to have ownership in a property now compared to the pre-pandemic times.
It was observed in the survey that 24.1% of the respondents preferred to invest in properties falling under the budget margin of Rs. 60-80 Lakhs while 13% preferred to invest in Rs. 80 lakhs to Rs. 1 Crore budget segment and 13% preferred to invest in properties above Rs. 1 Crore. Only 9.3% of the respondents preferred to invest under Rs.45 lakh category.
The demand for real estate is now slowly gaining back its momentum after the pandemic struck. The government, builders, and banks have been instrumental in driving the demand. The technological development and peoples associated with the technology in recent times have opened up new ways of investing in real estate and also how sellers communicate with their potential investors. Due to the technological advancements, we have also seen an increase in demand for properties in the outskirts.
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Reasons for higher interest in property sales FAQ’s:
Yes, the real estate sector is expected to face increased demand and high interest in the year 2021 as the cost of acquiring the property has been reduced with the help of builder discounts and stamp duty reduction. It is also a wise choice to invest in real estate in the year 2021 as the home loan interest rates are lower than before.
It is better to rent out your property than to sell it as selling and buying another property may incur some costs. On the other hand, by renting out your real estate property you are also opening a channel of passive income in the form of rent. By renting out the property you do not close on your option to sell as you can sell your property anytime in the future as the price increases. Thus renting your property is recommended.
Several real estate analysts have stated Hyderabad to be a top destination for real estate investments. Its residential real estate sector is known for its low-risk and high-return avenues. Due to the rapid development of Hyderabad’s infrastructure, connectivity, and facilities such as education, employment prospectus, medical and healthcare, IT developments, hospitality, etc., Hyderabad has turned into a hotspot for investing.
Some of the best locations for investing in India include Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Pune, and Allahabad.