As the Indian economy has successfully navigated through the global headwinds and the outlook looks robust, housing demand will continue to soar. There is a healthy demand in the market, fueled by both investors and end users.
Close to 42% of the demand is coming from Mumbai and Bangalore, followed by other metros. Interestingly, the residential markets in other smaller towns are also climbing the curve.
In terms of ticket size as well, the nature of the industry is far from homogenous. Affordable and mid-income housing is generating a sizable portion of the revenue. However, the demand for high-ticket investments is also expanding fast. Presently, premium properties (1.5 crore and above) contribute close to 20% of the overall market.
There is a large section of homebuyers who are looking for larger homes with better aesthetics and design and plenty of amenities. It can be safely said that the sun has risen on high-end and luxury real estate in India.
Housing is becoming
a commendable asset
to invest in
Investors are also gravitating towards the housing market alongside end users, fueled by long-term growth potential. Buying a home can provide both smart rental income and elevated appreciation.
The trend of investing in housing further picked up during the pandemic, when nationwide lockdown busted the bull run in the Commercial Real Estate (CRE) sector. Even after the pandemic, the homebound office culture resulted in a slowdown in the absorption of CRE assets such as office and retail. This led many investors to look out for prudent options in the residential market. The lucrative payment plans further accelerated growth in pure-play investment activities in the housing industry.
Although most of the offices have resumed and the commercial sector has fully recovered, interest in the residential segment is far from subdued.
Steps to Identify lucrative options in the Residential Market
Like any other investment, the housing market in India requires a systematic approach. Following the right strategy can be instrumental in mitigating risk and maximising the overall ROI potential.
Firstly, before investing in a home, one should learn more about the location. There are multiple parameters across which the potential of a location can be examined. This includes, but is not limited to, infrastructure developments, proximity to IT and business parks, growth of malls and retail sectors, the overall livability index, the state of social infrastructure development, the availability of tourist attractions, etc. Such factors can greatly drive demand and contribute to growth in prices.
Likewise, one should also assess the future potential of a location or region. This can be done by keeping a pulse on the future development of airports, metro lines, suburban railway networks, highways, commercial hubs, shopping centres, malls, etc. Meanwhile, it is advisable to study the future pipeline of projects. An extensive pipeline, if it outstrips demand, will result in a softening of the price hike.
Secondly, one should do some due diligence at their personal level. Discerning buyers should learn about the credibility of the developers. While a RERA licence is a good choice, dig deeper to learn more about the reviews of the developer and check out their media coverage. This can give a fair idea of the overall track record of the developer and aid in the home investment process.
Thirdly, do some rough estimations about the ROIs. It might not be a well-calibrated quantitative analysis, yet with some effort, one can arrive at a ballpark figure. Evaluate the projected final value of the project and add to it the anticipated total rental income. Also, consider other benefits, such as concessions in income tax under 80 C, and one can comfortably arrive at a ROI figure. This at least can give a fair idea about the viability of an investment decision.
If done right, a residential investment can be as lucrative as a CRE deal. Also, do not forget that buying a residential property hedges against future inflation. Likewise, even if you don’t wish to sell out in the future, it can always be utilised for personal use.
(The author, Jetaish Gupta, is the co-founder and director of Adore Group.)
