Will it be wise to invest in the real estate market in 2021?

• The real estate sector is one of the bellwethers of the Indian economy.

• It is also the highest employment generating sector in the country besides agriculture and contributes 7 percent to the country’s GDP.

The real estate sector is one of the bellwethers of the Indian economy. It is also the highest employment generating sector in the country besides agriculture and contributes 7 percent to the country’s GDP. It has also been forecasted that if the reform measures that have been announced, are executed well, the sector might end up contributing 13 percent to the country’s economy by 2025. It means that the sector presents a plethora of investment opportunities as well.

However, the real estate sector has been through several ups and downs in the past few years. As soon as the sector had begun overcoming the initial shock caused by structural reforms like GST and RERA, the Covid-19 pandemic struck our shores. The nationwide lockdowns all over the world led to broken supply chains, which caused problems with overseas procurement. The sector was also plagued with liquidity issues and a shortage of labor.

But as we get closer to finally having a vaccine on our hands, things are beginning to look up. Investors are wondering whether it is a good idea to invest in real estate in 2021.

Let us find out:

Changed consumer behavior to be taken into account

The pandemic has caused a sudden shift in consumer behavior and people’s expectations from a real estate market have changed. The buyers interested in residential properties now want larger layouts with better safety measures in place, a focus on hygiene, and captive amenities. With WFH becoming a norm, we might also see a rise in the demand for residential properties that have dedicated office spaces.

If we consider the commercial real estate properties, satellite offices outside of Central Business Districts will draw more attention.

The sector is on the road to recovery

The Prime Minister’s call for self-reliance under the Atmanirbhar Bharat campaign is a good sign for the real estate sector as the projects will now get policy support from the government. The increase in Foreign Direct Investment (FDI) is also an indicator of swift recovery.

The disruption caused by the pandemic may seem incomprehensible at the moment but we mustn’t forget that every crisis looks small in retrospect. The pandemic is only a blip on the cosmic radar and the Indian commercial real estate sector continues to attract investors who have their eyes fixed at the long-term horizon. With the 2021-22 budget just around the corner, the sector is expecting the government to come up with several relaxations, which will further boost the demand and draw the attention of even more investors.

Going forward into 2021, we can expect to see a consistent flow of investment as easy liquidity by global central banks keeps a tight leash on interest rates and real estate investments will promise high yields.

According to a report by Savills India, private equity investment in the Indian realty sector may recover tremendously and may bring an influx of $6 billion in 2021, registering a 30% year-on-year growth.

As the economy recovers and development measures are undertaken by the government, the real estate prices in metropolitan areas will stabilize and may register upwards in certain areas as the demand in those areas improves.

Budget 2021-22 to play a crucial role

The impact of Covid-19 on the Indian economy has been disastrous, but with the rollout of the vaccine, things will begin to get better in the coming two quarters. If the new budget manages to inject liquidity in the sector and the interest rates are reduced, albeit temporarily, we might witness growth in the real estate sector. The temporary stamp-duty cut that was introduced by the Maharashtra government led to significant growth in the demand. Therefore, the sector expects the government to introduce GST cuts and tax exemptions in the new budget, even if they are for a limited period, as they may very well aid in the growth of the real estate sector.

In conclusion, we can say with a degree of certainty that the real estate sector is set to bounce back in 2021 and will, therefore, provide great investment opportunities – especially for players who are looking at long-term gains. As the buyer sentiment improves, the fence-sitters will also be encouraged to get involved and invest, which will further inject liquidity in the sector.