As the world moves to take stock of COVID-19 impact and its aftermath, we can’t help but stress on the importance of securing alternate sources of income. Every industry is feeling the challenges thrown up by the pandemic. Revenues and cashflows have stuttered and this has unfortunately resulted in job losses, furloughs and pay cuts.
In this crisis, it is interesting to note that investors have carefully deployed their funds across multitude of products. The wise ones are using rock-bottom prices to buy into products that had earlier been beyond their investment appetite.
This is in line with our belief that the best way to make money is to invest when the markets are down or recovering. A bullish market significantly reduces the quantum of return you can make on your investment. However, in the earlier case, investors stand to make disproportionate returns on their returns once markets recover from the turmoil.
Signalling a partial uptick
We have seen a revival of demand in Indian real estate. The products we offered were from the top tier, and we had developers offering assured rental guarantee up to 60 months on residential properties and up to 20 years on commercial. These are in addition to the schemes where the major chunk of liquidity outflow for investors happens only at possession.
However, the underlying trend beyond these transactions highlighted a unique perspective - NRI investors are looking at securing a second source of income.
COVID-19 has forced NRIs to relook at real estate investments. The earlier demand for a home in India has changed to the tune of acquiring an asset offering similar lifestyle and amenities as seen abroad. The end-user who was looking at buying a one-bedroom apartment is now looking at 1.5/2 options because of the possible flexibility required in work/learn from home environments.
The investors sitting on the fence have sprung into action to take advantage of multiple factors like rock-bottom prices, regulatory benefits on stamp duty, and depreciating currency, among others.
Prepare for Plan B
One of the harsh learnings for NRIs from COVID-19 has been recognizing the fact that life in a foreign country comes with an expiry date. The virus brought in a lot of uncertainty in terms of this date. It could be tomorrow... or it could be 15 years from now.
A relocation always comes with its own set of problem. NRIs have shown a dedicated effort to mitigate at least one of those challenges – finding an income source after returning to India.
The equity markets are unpredictable and any returns made here comes with a high-risk premium. Gold has reached sky-high levels and a lot of support will be required to keep it there, let alone move upwards in future. With Indian banks reducing interest rates on deposits, keeping your money in the bank is approaching points of negative return after factoring in inflation.
An informed decision to purchase real estate at this moment guarantees the investor of making significant return on their investment. Commercial properties can yield 10-12 per cent return on the capital invested while Grade A residential projects will generate up to 4 per cent rental return. All this comes with the security of owning a tangible asset.
The manner and speed in which the ecosystem of real estate is evolving to tackle the effects of COVID-19 is proof that the road to recovery is approaching sooner than expected. The fact that new launches have reduced significantly has caused demand to match up with supply.
In the near future, this demand is predicted to eclipse supply and leading to a rise in prices. To book profits when that happens, you need to invest now.
Like the famous phrase goes, “The object in the mirror is closer than it appears”, the real estate uptick is just around the corner. NRIs would do well to use this opportunity to play the sector and secure a much needed second source of income in the process.
- Shajai Jacob is CEO - GCC, ANAROCK Property Consultants.