Jobaaj Stories
Since 2014, Real Estate has been relatively slow to catch pace with the growing economy. Excess supply and cheap money are among the key factors driving this downturn at least in the housing sector. However, the commercial market has remained relatively positive throughout the course.
How does COVID impact my decision to invest in Real Estate?
Contrary to the previous speculation, COVID has been the key attribute to the surge in demand for housing. As reported by ANAROCK Property Consultants, MMR and Pune collectively accounted for 53% of total sales across the top seven cities in India in the first quarter of 2021. In early 2020, the sector was impacted due to Covid-19, but post easing of lockdown, the sector witnessed great momentum. Mumbai alone recorded robust sales in Q1 2021 of 13,750 units against 9,120 units' year ago - increasing by 51% in a year. The report further stated that the Mumbai region witnessed the highest yearly decline (8%) in total unsold housing stock in the same period. According to CBRE data, housing sales in the July-September 2020 quarter increased by a strong 86% on a quarterly basis. As against 12,000 units in Q2 2020, 22,000 homes were sold in the top seven cities in Q3 2020.
This growth is not limited to India; according to a Knight Frank analysis, the price of prime real estate, notably in Asia, grew by an average of 4.6 percent in the first quarter of 2021, the largest quarterly gain since Q4 2017. Los Angeles had the largest price change among American cities, with a 12.6 percent increase from Q1 2020 to Q1 2021.
Pandemic enabled the young generation to realize the importance of having their own house and must have been a key contributor to the increased demand. Additionally, the requirement for additional space to cater to work and entertainment space fueled the demand. Further, a relatively low interest rate and a stand to lower the state stamp duty added to the surge.
India's Real Estate Sector is expected to reach $1T by 2030 contributing to ~13% of overall GDP.
How can I invest in Real Estate?
One of the more sophisticated ways of getting exposure to real estate is a private investment into the sector.
But, if you want to refrain from making the hefty investment, try getting indirect exposure - either through REITs or inquiry investment in real estate builders. Read more about REITs and what has changed recently here.
Thanks for Reading!
Shubham Agarwal (CFA L2 Candidate | Incoming MBA candidate at University of Cambridge, UK)
