Real estate most preferred asset class for investment for over 59% Indians

Real estate is the most preferred asset class for investment for over 59% Indians and continues to be dominated by end-users with more than 67% buying properties for self use. At least 33% of the prospective buyers aim to purchase a property from an investment perspective but given that prices have escalated significantly across the top seven cities, there is a 3% dip compared to last year, a FICCI-Anarock report has said.
The key demand of homebuyers continues to be timely project completion (98%), improved construction quality (93%), and well-ventilated homes (72%), most buyers, it noted.
Over 67% survey participants are buying properties for self-use. In comparison to the previous survey (H2 2023), there has been a 3% surge in the share of participants seeking property for end-use in the H1 2024 survey. This trend is likely to continue going forward as well because there is a sense of security and safety associated with homeownership, according to the second edition of the Homebuyer Sentiment Survey – H1 2024 that was released at the FICCI Real Estate Investment Summit held in Mumbai on October 18.
Affordable housing is struggling to meet expectations, as over 53% of homebuyers express dissatisfaction due to issues related to location, construction quality, and unit sizes.
The survey also noted that home loan interest rates below 8.5% would have little impact on buying decisions for 71% respondents, but rates exceeding 9% would significantly influence 87% of potential buyers.
‘For rates between 8.5 per cent and 9 per cent, about 54 per cent expect a moderate influence on their choice,’ the survey said.
There has also been a notable shift with investors once again taking some breather and holding on to buying real estate. When compared to the H2 2023 survey, there has been a 3% decline in the share of participants who are buying a property from investment perspective rather than for self-use on account of the rising real estate prices. At present, at least 33% of the prospective buyers aim to purchase a property from an investment perspective, it said.
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A significant emerging trend points out the interests of investors entering the market with the objective of securing a steady rental income. This demand is largely driven by the fact that rental values in prominent micro-markets across major cities have risen by as much as 70% over the past two years. A few investors are also investing in real estate to leverage capital gains for future entrepreneurial endeavours even as a few are focused on establishing an emergency fund and others are prioritizing contributions to retirement savings. Additionally, some allocate their investment returns toward achieving aspirational travel goals, the survey showed.
 
The demand for ready homes has declined significantly. The ratio of ready homes to new launches is now 20:25, compared to 46:18 in H1 2020. As many as 51% of respondents prefer 3BHK units, showing increased demand for larger homes.Also Read: Why real estate developers are launching a flurry of ₹5 crore-plus luxury apartments in NoidaPremium and luxury homes gain traction
While the budget range of ₹45 lakh to ₹90 lakh remained the most preferred budget for over 35% of prospective homebuyers, premium and luxury homes are gaining significant traction. At least 45% respondents now prefer to buy homes priced more than ₹90 lakh.
As for segments, apartments are still the most preferred property type (58%), but residential plots are gaining popularity, especially in southern cities, the survey showed. Notably, residential plots are seeing a growing interest by the prospective buyers with at least 20% property seekers preferring to invest in these.On analysing the city-wise trends, it emerges that southern cities have a higher preference for residential plots – Chennai with 30% votes, 29% in Bengaluru and 27% in Hyderabad. Several large and branded developers have extensively launched residential plot projects in these south cities over the last few years and buyers have come forward to close the deals. Similarly, villas and row houses are also extensively preferred in these southern cities, the survey showed.
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The survey gathered responses from 7,615 participants across 14 cities and was conducted between January and June 2024. Cities that were part of the survey included MMR, NCR, Bengaluru, Pune, Kolkata, Chennai and Hyderabad.
During his keynote address, Pramod Rao, Executive Director of SEBI, emphasized the importance of regulatory frameworks in fostering sustainable growth in the sector. “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,” Rao said.
“The significant shift in consumer preferences away from ready-to-move homes towards under-construction properties indicates growing confidence in developers and the regulatory environment. This trend reflects a maturing market and the positive impact of regulatory measures like RERA,” said Sandip Somany, past president, FICCI and Mentor, FICCI Committee on Urban Development and Real Estate and CMD, Somany Impresa Group.
“India’s economic growth is driving rapid expansion in the real estate sector, with the residential market projected to reach $1.04 trillion by 2029, growing at a 25.6% CAGR. This growth is fueled by rising demand for ultra-luxury properties and significant investments,” said Raj Menda, Chairman, FICCI Committee on Urban Development and Real Estate and Chairman of the Supervisory Board, RMZ Corporation.
He noted that today’s homebuyers, predominantly millennials, are more inclined to purchase larger homes and prioritize high-quality products. “They are not merely seeking shelter; rather, they are looking for spaces that embody durability, aesthetic appeal, and long-term value, even if these come at a premium. They tend to favor investments that are perceived as low-risk and capable of providing stable returns over time. Consequently, one of the primary demands from homebuyers is the assurance of timely project completion,” he said.
Anuj Puri, chairman and founder of ANAROCK Property Consultants, said that the FICCI-ANAROCK Consumer Sentiment Survey is timely as it gauges contemporary homebuyers’ preferences in the current market environment and highlights currently significant trends in Indian residential real estate. The survey provides all industry stakeholders with critical insights into the Indian property market from a consumer perspective.