The Financial Express

Real estate investment planning

| Updated: November 19, 2020 16:40:24

Real estate investment planning

The global Covid-19 pandemic plunged all kinds of businesses into a severe economic downturn. It is very normal that if there is an epidemic, there will be an economic recession. The impact of this economic downturn is much higher in the housing industry.

The business of the housing industry declined suddenly in recent years as the number of buyers has plummeted. However, this period is a very good time for the buyers or investors as there is no balance between supply and demand and the surrounding environment is purchase-friendly. So during this time, there can be a continuous discussion on what benefits a buyer can get by investing in any sector of flat or real estate.

Imbalance of supply and demand

If the supply exceeds the demand for a product, prices naturally fall slightly to balance the market. Before Covid-19, the supply of flats under construction or fully constructed was more than the demand of the real estate market, but other sectors of trade and commerce were doing well. The number of buyers declined in a hurry only because of Covid-19. But the salable flats are in the market as usual. For this reason, small and medium developer companies are in a cash crunch and many are planning to sell the flats at lower prices than the investment to cover the incidental costs. Small and medium companies are willing to take measures that in such cases, large companies are forced to sell their products at lower prices or with more facilities. Now it is the time for buyers to take the advantage of the sellers as the supply is much higher than the demand.

Benefits of low interest bank loans

Bank loan interest rates have been set at the lowest in many years. From the 1st  April 2020, the interest rate on any loan other than credit card has been fixed at 9% or in some cases much lower. On the other hand, the bank is paying interest to the depositors at the rate of only 6.0 per cent. But, two years ago, various banks or finance institutions offered interest rates from 9.0 to 11 per cent. That's why very few customers are getting benefits by depositing money in the banks. Now, the benefits of taking a loan from a bank and repaying at a low interest rate by investing in the right place could not be imagined in the past.

Lack of proper means of investment and confidence

At this time, the investors are earning very little interest by keeping money in the bank, everyone has lost their confidence due to the collapse of the capital market. The capital market is now a place of uncertainty and despair. So, no one here wants to invest anew in this situation. Also, it is not wise to invest large sums of money at a time when sales are declining in most parts of the business world, where still the old businesses are struggling. In this situation, the sellers are far more than the buyers in the real estate market and sellers can buy a good flat or commercial space easily. This is the fact that, the chances are much higher of getting a good flat or commercial space at a relatively low price with the help of a real estate consultant which was so tough before Covid-19.

How long can this price decrease?

Simply, it can be said that as long as there is an economic downturn, prices will continue to fall day by day. If there is a way to invent a vaccine for Covid-19 or naturally, if the virus is weakened, the pandemic seems to be partially over. The suffering of economy does not last long, if it returns to normal. Market economists have explained when all the recessions of the past turned around But this time, market analysts are struggling to explain the epidemic. This period of economic recession can be divided into five parts. First of all, the time just before the recession. This time we can call the month of March 2020. Secondly, sales are getting down. This time we can call the month of May. Then the level is slowly coming back to sales. This time starts from mid-June. Fourthly, prices start to rise in a hurry. This time is not going to be explained. Many investors have already asked me this question but I don't think any market economy analyst can tell the exact time. This situation will not return unless the pandemic is controlled or fully adapted and it will not return unless all kinds of trade and commerce are dynamic. However, the effects of the last world war or epidemic can be estimated from the various concepts of human life and market economy at the present time. At some point in the next two to three years, the wheel of the economy will be moving in the right direction. The last level is when the market returns to its previous level or better, and the time will be the six months after the previous level. That means, if the fourth level is February 2022, then the fifth level will be August 2022. At this time the price of the flat is likely to be higher than the first level because the economy of the developed world is likely to return to normal during this time. After that, remittances from abroad will increase a lot and simply the expatriates will want to invest in the country. Another important point is that these two years of flat sales and the rates will be lower than the previous years, so the developer companies will not plan to start a new project with a new landowner. As a result, there will be no supply despite the demand for new flats in the market for a while. Because it will take two and a half to three years to build a small or medium-sized project. The country's housing industry, which employs about half a crore people in 211 sub-sectors and it has long been the largest contributor to the economy after agriculture and readymade garments. The good days in real estate sector are sure to come. In the meantime, the government is giving the opportunity to invest undisclosed funds in the budget of 2020-21 on very easy terms. As a result, money that was smuggled abroad has created a new possibility for investment in the country. In addition, the cost of registering flats came down slightly earlier this year, as sought by Real Estate Housing Association.

Caution in investing this time

As a conscious buyer or investor, the benefits of investing at this time are many and there are some precautions to be taken. What was the price of the flat or commercial space you are going to buy before Covid 19? and now, the right valuation should be determined in consultation with a real estate investment consultant on what price the seller is currently seeking. Usually the price reduction can be 10 to 20 per cent or more. In some cases you can get it at a lower price from the land owner or those who bought the flat earlier. Developer companies that have an adequate supply of cash will not be willing to push the price right now. Also, the real estate consultant needs to know the exact details of who is ready to sell the flat below the market price at this time. In case of investment, you must try to buy from the final stage of construction of the project or from the completed project. However, it can be purchased from projects under construction from trusted established companies. As a buyer, one should try to take maximum consumer-friendly benefits in the sales contract. Including all legal and strategic issues for real estate investment must be discussed with a professional consultant to make a property valuation by following the current format and checklists. In order to avoid falling into the trap of marketing in any situation, a proper and timely-decision has to be taken. For those buyers, who are willing to book a flat this year or next, it is the right time to make a decision this year if possible. Because after a while, this recession of the economy will end and the flat prices will increase more from this situation. Only the established business can survive this catastrophe in the real estate sector and the rest are likely to fall behind. A review of the past few days shows that in most cases the real estate buyers in our country had not been able to understand the time value of money. But, now it is the right time to invest in this sector with the right advice, direction and timely decisions and that can be the best investment of life.

The writer is a real estate consultant
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