Just like all other segments of the economy, the real estate market too is reeling under the impact of COVID-19 pandemic. But there is a silver lining despite all the fear mongering and panic. The pandemic is likely to show many opportunities for buyers and sellers alike.
The luxury housing sector may see a reduction in prices while developers may also offer attractive freebies and discounts to those investing in the mid segment. Some of these may include deferred payment plans or even a free Corona insurance in the wake of this new normal. Affordable housing may also see a moderate price correction.
Laws of Wealth – Psychology and Secret to Investing Success
Bestselling author Dr. Daniel Crosby has written an incredible book called “The Laws of Wealth – Psychology and the Secret to Investing Success.” It is highly relevant in the current context especially a chapter called Rule #3 Trouble Is Opportunity.
The chapter opens with this quote “The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” – Sir John Templeton.
If you examine these words in the context of real estate, you will start understanding that this is not the time to be pessimistic.
Analyzing the opportunities for the real estate sector, you can see that it has a proven track record of being a safe investment haven with a steady growth rate.
In the past decade, people had turned to other investment options like equity markets, mutual funds, derivatives and fixed deposits etc. However, with the recent market crash, not only stock markets but a host of other investment instruments have seen a significant downtrend.
This will lead to investment in real estate as investors have realised its stability in this volatile market. Just as the automobile sector will see an uptick in demand due to social distancing norms and people will want to own a vehicle rather than use public transport. Similarly, there will be renewed appreciation for housing as a tangible asset whose value is not as volatile as other forms of investment.
Change in millennial mindset
So far, the millennial generation has avoided investing in housing and property. They have opted for rented spaces and spent more on other luxuries such as automobiles, expensive holidays etc.
Due to the new shelter-in-place directive across the world, millennials have spent a great deal of time indoors. This has led to a change in mindset and attitude towards the importance of owning a house and the safety that comes with it.
Affordable homes have a steady demand graph and a majority of ongoing projects are designed accordingly. However, experts believe there could be a demand for bigger homes now with the Work From Home economy necessitating an extra room to set up a home office.
There are also reports of many businesses moving their base out of China and looking at alternative operational locations. This could signal a new wave of demand in commercial real estate in India.
Since cash is king in these dire times, people will be cautious in spending on travel, hospitality and other big ticket expenses that require social mingling, this will translate into significant savings. Investors who have seen their investments in stock, equity and mutual funds go down the drain will avoid re-exposure. The savings could well be diverted into real estate with its consistent track record.
Last but not the least, as a response to the pandemic, many of the world’s biggest developers and construction companies and developers are rethinking their visions for the future of building. Projects under construction are being redesigned to accommodate innovations and social safety. The top-down revision of the real estate sector will have a trickle down impact on how we build, the materials we use, the way we interact with people in private and public spaces.