Real estate tops investment choices for Indians; Shift towards luxury homes

Despite the allure of high stock market returns and lucrative mutual funds, a recent FICCI-ANAROCK survey reveals that real estate remains the most favored investment choice for 59% of Indians. The survey, titled "Homebuyer Sentiment Survey - H1 2024," sheds light on evolving buyer preferences and market trends in the Indian real estate sector.

Key Findings:

Investment Preferences: While properties priced between ₹45-90 lakh continue to be popular, there's a notable shift towards luxury homes. Currently, 28% of buyers are looking for homes priced between ₹90 lakh and ₹1.5 crore.

Buyer Intentions: The survey shows that 67% of respondents are purchasing properties for personal use, while 33% are buying for investment purposes. However, there has been a decline in demand for ready-to-move homes.

Market Dynamics: The ratio of ready homes to new launches has shifted from 46:18 in H1 2020 to 20:25 in H1 2024, indicating a growing preference for new projects. Additionally, 51% of respondents now favor 3BHK units, reflecting a desire for larger living spaces.

Property Types: Apartments remain the dominant choice, preferred by 58% of buyers. However, residential plots are gaining popularity, especially in southern cities.

Buyer Concerns

Project Completion: A staggering 98% of respondents prioritize timely project completion.

Construction Quality: 93% of buyers are concerned with the quality of construction.

Ventilation: 72% emphasize the importance of well-ventilated homes.

Influencing Factors

Home Loan Rates: Interest rates below 8.5% have little impact on buying decisions for 71% of respondents. In contrast, rates above 9% significantly influence 87% of potential buyers.

Rental Income: Rising rental rates in major cities are driving investor interest, with 57% of buyers purchasing properties for rental income.

Affordable Housing: Over 53% of homebuyers express dissatisfaction with affordable housing options due to issues related to location, construction quality, and unit sizes.

Industry Insights

Regulatory Importance: Pramod Rao, Executive Director of SEBI, highlighted the crucial role of regulatory frameworks in fostering sustainable growth. "Investor confidence is vital for the industry's long-term success, and SEBI's focus on transparency and governance has been key in building this trust," he stated.

Commercial Real Estate Raj Menda, Chairman of FICCI Committee on Urban Development and Real Estate, noted the thriving commercial real estate sector, supported by 1,600 Global Capability Centers and emerging secondary markets. He emphasized the need for diversification and alignment with global trends.

Technological Advances The sector's evolution includes an increased interest in alternative assets like REITs and distressed properties. Anuj Puri, Chairman and Founder of ANAROCK Property Consultants, underscored the value of the survey in providing critical insights into the market from a consumer perspective.

Fractional Ownership Sanjay Dutt, Managing Director and CEO of Tata Realty and Infrastructure, highlighted the shift towards smaller-scale REITs (SM REITs) and the advantages of fractional ownership. This allows investors to access high-quality assets with lower capital commitments, democratizing real estate investment.

The survey's findings offer valuable insights for all stakeholders in the real estate industry, reflecting a dynamic market with changing buyer preferences and emerging trends. As the sector evolves, the focus on transparency, quality, and technological innovation will continue to shape the future of Indian real estate.