How will COVID-19 impact investment in land?

[ecis2016.org] We look at how the Coronavirus pandemic is likely to affect individuals’ and organisations’ approach towards investments in land

There has been a lot of speculation over the future course of the real estate industry, following the Coronavirus pandemic. While many believe that there may be hefty price discounts, industry experts disagree. With prices of raw materials, cost of compliances and transportation increasing, most builders maintain that property prices will not reduce, although some developers may extend offers and limited-period concessions on certain units. While many buyers and investors may hesitate to put their money in real estate right now, residential plots and land investments continue to witness stable and significant searches, inquiries and conversions.

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[ecis2016.org] Investing in land: Here’s what you should know

Investing in land during COVID-19

Here are some reasons why buyers may perceive land as promising investments, in spite of the COVID-19-induced slowdown:

Land prices

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Unlike an under-construction or ready-to-move-in property, residential plots are not as expensive and most people may be able to afford a plotted development with their savings. People tend to opt for small land parcels in developing areas, where the cost of investment is much lesser than what you would spend on a flat for sale.

Flexibility

Unlike flats, residential plots give you the flexibility to build and design your home in a way you want. Customising a property to your needs, is much cheaper than approaching a developer to do it for you. It also helps you budget your expenses better, since you will have a design plan prior to the construction.

Sizable returns

It is a known fact that if you are looking at long-term returns, land investment is the best option. All you need to do is invest at the right time. For example, you can invest small in a developing area now and wait over the mid to long-term, to enjoy the price appreciation.

Good avenue for youngsters

Anyone can invest in plots but young professionals should consider investing in this asset. As already mentioned, the entry prices of this real estate asset are low and this makes it suitable for those who are in the early stages of their careers. While the Coronavirus disease has dampened the sentiments of prospective home buyers, analysts are confident that it is just a matter of time before buyers return to the market.

Rajinder Parashar, a Gurugram-based broker says, “We have seen some property investments being put on hold. Fortunately, plot-related inquiries are stable in and around Sohna and Sultanpur, if not up. One of the reasons, is that the cost involved is not very high and those who are buying now anyway intended to build on it later on. So, there is no sense of loss.”

Residential land investment trends

“Buying a property is not easy, especially if you are looking to invest in a central location. In the short-term, companies will assess the productivity of employees who are working remotely and in the mid-run, these employees or prospective buyers may consider living along the outskirts of cities. This will not only help their budget but also enable diversification of their investment patterns,” says Kishore Mundhra, a Mayur Vihar-based broker who has also been managing the business in the far-off areas of Noida. “People buy apartment units, because of land scarcity and because this is what is available. In farther-off places, land parcels are available at reasonable prices and owning independent homes can become a reality,” he adds.

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Mundhra says that while there have been inquiries about such land parcels, conversions can go up only if companies allow remote working over the long-run. “People may also consider going back to their native places and that can create demand in tier-2 and tier-3 cities,” he points out.

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Industrial and commercial land investment in 2020

Recently, Telangana’s IT and industries minister, KT Rama Rao, said that the authorities and officials should be prepared to take advantage of the opportunities in the post-COVID-19 era. Land investments from companies may see a rise, especially in the peripheral and new areas. Besides, it becomes important for states to explore sectors and industries that will require land for businesses – both old and new, he said.

Impact of work-from-home on land investment

Many Indians have been forced to work from home (WFH), due to the Coronavirus pandemic. “A cross-section of the roles in our company cannot be asked to work from home but knowledge workers should definitely shift to the WFH culture,” says Akriti Vasudeva, project manager in an MNC. Rishikesh Roy, a finance professional adds: “WFH is a culture we have always shied away from but looking at the logistics, companies can save a lot of money incurred on utilities, day-to-day administration, cost of real estate in prime locations, etc.” Roy feels that many companies will now try to reduce costs, by shifting their branch offices to peripheral areas. This will lead to industrial, commercial, as well as residential land investments witnessing an uptick in the future.

Land bank for investors

In a recent interview with the media, Uttar Pradesh chief minister Yogi Adityanath said that the government was working on a concept, to create land banks for industries. The CM said that foreign investors had shown interest and that the government was in talks with companies that were planning to shift out of China. With businesses in industries such as logistics parks and food processing looking to invest, states such as Uttar Pradesh, Telangana and others, are looking to capture the opportunity.

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