Financial Express - India’s burgeoning middle class drives housing demand

India’s burgeoning middle class drives housing demand. By Financial Express

India’s burgeoning middle class drives housing demand

Several middle-class professionals with the financial wherewithal are looking at real estate investment. Here’s why.

Written by Sanjeev Sinha

November 24, 2022 4:59:16 pm

Going forward too, this trend is likely to continue given that many people’s appetite for risky investment options is gradually depleting.

Real estate as an investment has once again gained prominence post pandemic. It is not just for self-use that people are looking to buy real estate but also the fact that a physical asset such as real estate is one of the safest investment options in today’s time. It has especially proved to be true during exigencies such as the pandemic.

Meanwhile, other asset classes such as the stock market, mutual funds etc, have been rather risky investments with both bull and bear run. Hence, several middle-class professionals with the financial wherewithal are looking at real estate investment.

This was further validated in ANAROCK’s recent consumer sentiment survey (H1 2022 survey). “We saw homebuyers’ sentiments went up by 5% compared to last year’s survey results for Real Estate as the best asset class for investment. In H1 2022 survey, 59% respondents voted for real estate as the best investment option in the present scenario, followed by 28% respondents who consider stock market as the best option amongst all asset classes for investment. Asset classes such as gold and fixed deposits continue to be least preferred investment options for respondents as seen in the H1 2022 survey and the previous four surveys,” said Anuj Puri, chairman, ANAROCK Group. Currently, only 7% and 6% respondents voted for gold and fixed deposits, respectively, as their best investment option.

“However, given that FD rates have increased slightly after the increase in repo rates by RBI in recent times, it will be interesting to note a change in trend (if any) in the next survey. Also, the middle-class population that was left unaffected by the pandemic sought to put their disposable income into buying a home, many for second home as well. No wonder, we saw the second home market across cities get a new lease of life during the pandemic,” added Puri.

What is noteworthy is that going forward too, this trend is likely to continue given that many people’s appetite for risky investment options is gradually depleting. Many with the long-term investment plan are, therefore, considering real estate as the best option.

Industry experts say while acquiring a new apartment in the heart of metropolitan cities may be difficult, however, with government subsidies and lucrative loan repayment options, more and more people in the middle-income strata are looking to invest in the home of their dreams. And leading builders are coming up with modern projects that deliver the most affordable apartments for the working population.

Commenting on the same, Pradeep Aggarwal, Founder & Chairman, Signature Global, said, “In the wake of the pandemic, the security and amenities provided by owning a home far outweigh and offset the financial strains. More than ever before, real estate is considered a sound financial investment due to a plethora of reasons. These may include the boost in work-from-home culture and people opting for more spacious accommodations to strike a work-life balance. Moreover, people want all their daily needs met within integrated communities that offer all modern amenities within close vicinity. With large inventory and various housing options in every price bracket, the middle-income population feels comfortable to assess the best housing options for them.”

“These integrated communities provide green landscapes that are peaceful and situated away from the pollution and crowding of the busy city. Offering a serene lifestyle away from the busy city, the middle-class population invests in properties that offer excellent connectivity to all nearby social infrastructure like hospitals and educational institutions, while also being linked to excellent metro and road networks,” Aggarwal added.

Shashank Vashishtha, Executive Director, eXp India, said, “Owning a home is the biggest dream for the middle-income group in India. It implies quality supplies at reasonable prices for homebuyers. While buying a new residence in the primary city location may be challenging, the middle-income group can comfortably rent a higher-income apartment. This group’s apartment purchasing choice is influenced by loan repayment ability and annual rental expenses. Builders’ affordable housing sectors are the finest investment potential for the Indian working class. These affordable housing segments provide unique prospects for the middle class to create their dream home. Consumers are also becoming more interested in low-maintenance, energy-efficient, and environmentally-friendly homes—which has increased interest and expenditure on such low-cost, environmentally-friendly, affordable housing.”

“The recent survey by PRICE (People Research on India’s Consumer Economy) shows the percentage of middle class has increased from 14% in 2004-05 to 31% in 2021-22, which is good news for developers, particularly those in the affordable and mid-segment housing segment. With the share of middle class households increasing in the coming years, developers will be more confident as they enter these segments, focusing on such clientele,” said Santosh Agarwal, CFO and Executive Director, Alpha Corp.

Furthermore, the number of ‘Super rich” people has increased from 98,000 in 1994–1995 to 1.8 million in 2020–21. “This is expected to grow at an exponential rate as India starts not only catering to services but also the manufacturing industry and the shift from “use made in India” to “make in India for the world”. We are much better poised to launch luxury and boutique housing developments to cater to this ever-growing, discerning segment of home buyers,” he added.

Thus, many builders are now constructing entire ecosystems around their properties so as to facilitate every need of their patrons. Research reports outline high demand for real estate by the middle class. This population is looking for asset classes that offer the highest living standards, while also being equipped with excellent social amenities. For the Indian working class, affordable housing segments being offered by builders are the best investment opportunity. These economical housing segments provide an inimitable opportunities for the middle class to build the home of their dreams.