Is Logical In Sluggish Markets..
by Mr. Ashwinder Raj Singh,
JLL India
The global share markets are
quite volatile, and despite India’s positive mid-to-long term economic outlook,
it is not untouched by these choppy waters. A lot of hard-won investor wealth
has been eroded in the recent past. In these uncertain market conditions,
it makes sense to regenerate one’s faith in real estate investments which can
fortify and enhance capital.
Though the real
estate industry has been going through hard times for more than a year now, the
hardship is primarily from the sellers’ point of view. For buyers, Indian real
estate is more lucrative than it has ever been before.
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| Ashwinder Raj Singh, CEO – Residential Services, JLL India |
Here’s why real
estate can prove to be the best investment proposition today, provided that the
buyer chosen a good location and reliable developer, and has done a detailed
due diligence of the deal:
The Right Time
For Lucrative Deals..!
Developers are
sitting on a huge amount of unsold inventory that is affecting their cash flows
and eroding profitability. Moreover, price growth has been more or less flat in
the major Indian cities for more than a year.
To break out of this deadlock,
players are offering handsome discounts and buyer-friendly home loan deals that
can actually make a lot of sense in today’s market conditions. In short, this
is a buyer’s market.
A Stable Asset..!
Unlike the share
market, which is speculative and highly volatile, real estate market is quite
stable. Even if the value of property comes down, it is a gradual process and
over a long period of time. This presents a much more favourable scenario than
the equity market, which changes its position several times a day.
In this
sense, real estate investment remain rock solid, even in adverse market
conditions with an extreme scenario of a nominal loss. The share market does
not provide this security, and can in fact wipe out an entire life’s savings in
a day and even lead to indebtedness.
The Advent Of
Smart Cities..!
The government
has recently announced the list of cities it wants to develop into smart
cities. Of course, it will take a few years to initiate the process and
complete these undertakings. However, the real estate market operates on
anticipatory sentiment, so the property markets in those cities will start
showing more buoyancy almost immediately.
This means that real estate
investments there will yield better returns in the long run, no matter how the
share market performs.
Also, with major
metros expanding to accommodate the influx of more and more citizens, new
projects are constantly being announced at the outskirts of the identified
smart cities.
One can currently strike very lucrative deals for the right kind
of assets by reputed developers operating in these areas, and secure
investments that will bring handsome returns in medium to long term.
Rental Income
Opportunity..!
Property
purchased in current scenario can be used to generate rental income while its
potential selling price appreciates over time – or, in a worst-case scenario,
remains at status quo at the purchase price.
As a lot of people are desisting
from buying new properties in the hope that prices will come down, or simply
because they can’t afford it, the demand for rental homes is rising steadily.
Tax Savings..!
With the
government as well as the business lobby successfully pursuing interest rate
cuts, home loans are getting cheaper. Lower home loan interest outgo and the
associated tax benefits on home loan EMIs generate extra savings.
This is
definitely a better scenario than investments in a volatile share market or
other instruments of investments that offer meagre returns over long periods.
Superior
Predictability..!
It is not
possible to predict how low an equity market will go. After every stock market
crash, there is an expectation of either further losses or / a turnaround, but
never a concrete prediction.
The irony is that if the market crashes, almost
every investment tool at one’s disposal – be it mutual funds, shares, bonds,
gold etc. – goes down at the same time, thus multiplying the investor’s losses.
It is only by keeping a constant hawk’s eye on the stock that one can hope to
attain some kind of predictability.
The real estate
market, on the other hand, has cyclical highs and lows which can be gauged more
easily. One can enter the market when it is at its lowest, knowing that prices
will not go further down. Builders will not sell at anything less than a
pre-determined price, no matter what.
There are
various forms of investment such as gold, fixed deposits, the equity market and
bonds available, but real estate is the safest bet in the long run – and the
most reliable investment instrument. Most of the properties built a few decades
ago have easily yielded a return of 200-300%. No other investment tool can give
comparable results.
A Tangible Asset..!
The final and
most decisive rationale for real estate investment is the fact that property is
a fixed asset that one can touch, see, feel and put to work.
One can either
occupy it or rent it out, but it is at all times available for every kind of
physical verification. Real estate becomes a part of one’s legacy, which can be
passed on to the next generations of one’s family.
Even though the investment
required for real estate is larger than most other instruments, both the
returns and the assurance of a tangible, physical and performing asset are at
all times more than consummate with the initial outlay.
To summarize…!
To shortlisting
and selecting a property, and finally completing the process of buying it is a
more involved and time-consuming and expensive process than what is required
for other kinds of investment, it is a one-time process.
After it is over, one
can watch the investment grow and have no concern about any risks involved. In
a sluggish market that is not showing any concrete signs of a short-term revival,
real estate is and remains the most logical investment option in India.
About the author..
Mr. Ashwinder Raj Singh is CEO (Residential Services) at JLL India
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