WHY TO INVEST IN REAL ESTATE

There is no doubt that these are uncertain times. Uncertainty about the future of economy and about our social relationships. For now, the focus worldwide is on creating a healthcare infrastructure that can help the civilization to sustain in the face of Corona virus. However, there are some less-reported developments, which are important for our future. Let me try to delve deeper into some of these aspects, which will have a long lasting impact on all of us.

As a response to the Covid 19 induced challenges, the governments worldwide have committed funds to fight this menace. That’s a wonderful news, because governments everywhere have shown a firmer resolve to fight a problem that has hit everyone, ever in the history of mankind. Starting from US to Japan to Europe and including middle-east to India, every government has simply opened its purse to pump in money into the businesses and healthcare infrastructure. It is estimated that all governments put together would invest close to 2% of world’s GDP into fighting Covid-19 pandemic. Now that’s a lot of money. We have never seen this kind of money supply coming all at once.

So what will this money do and where will it go. Let us look at history and try to figure out how this money would flow in and what would be the response. This money will start flowing into various infrastructure projects across the world. We have seen this story playing out so many times in past. Let’s take example of the world after Second World War. While, anyone around there at that point of time, would have thought that countries like Japan and Germany will never be able to grow out of world war devastation, what we see is completely opposite. The two countries not only repaired themselves but became the foremost world economic powers over the years after the war. Both of these economies are part of the top 5 economies of the world and the most stable ones.

The same happened during the great depression after the World War 1 and the oil price induced depression of 80s. Even if we look at our own Indian stories. In 1990, we reached a level where we felt like collapsing economically. There was a time during PM Chandrashekhar’s rule, when we didn’t have money to meet our debt commitments and we had to pledge our gold reserves. But what happened in the years after that. Did not we see the biggest asset growth in 30 years starting in 1991? It may look counter-intuitive when we are inside a crisis but when looked at retrospectively it all started making sense. The people who had the foresight to buy assets during those times of crisis, earned sweet returns on their investments. But those who were afraid and did not invest in assets, were left high and dry. The high inflation reduced the value of liquid holdings significantly.

Let us look at another aspect of this economic fight against the virus. Remember, since the world is fighting this together and it is known that if Corona virus simmers in any geography, it will affect the entire world, the movement of money will be swift across the borders. Fortunately India is at the forefront of this war against virus. There are several reasons for the same. Our large young population makes it an interesting case to watch out for how the virus story plays out here. We will discuss more about its impact in the next paragraph. Another contributing factor is our leadership position in Pharma production. Thirdly, our big IT sector. While China has been losing trust of the world as a dependable supplier, the democratic nature of our country enthuses more trust in other countries.

So why will we be better off with a younger generation? One, the mortality rate in youngsters is significantly lower than the older generation. We have a significant percentage of our population younger, which is much more than any large economy. This coupled with the fact that the way China has handled the Corona pandemic will bring India at the forefront for the corporations who want to move out of China and relocate. The Indian response to this pandemic and the statesmanship that our leadership has shown will keep us in good stead. Our leadership position in Pharma industry and our positive contributions to world society’s sure to make world look at as much more favourably. The idea of looking only at efficiencies while ignoring behaves aspects completely has made the world realizes the kind of challenges it poses. And therefore, we already see a much more positive tone for India than China or any other country.

Another significant change that the world will face on behaviour and social aspect is also a big plus for India. We are going to see a big shift in our behavior when technology will become much more important than what it has been. The social distancing will be the new norm and work from home the new corporate mantra. Outsourcing of work will get more traction and technology will be the way to go, for most developed western world. India holds a significant advantage in this area with significant progress over last 2 decades.

But how is all this going to affect me? And what should be my actions now which will benefit me economically in future. With expectation of these large government spending worldwide finding a route to India as deduced above, will create a surge in the prices of physical assets in India. While virtual assets like shares and bonds may take a long time to appreciate, physical assets like real estate will be appreciating fast and for a long term. Added to the fact, that new developments of real estate projects have already been very low as the segment has been facing head winds for years. The property prices have not appreciated for last few years and supplies are constant. With new norms of social distancing in place, the laugh of new projects will be much slower. So we will be in a state where too much money will chase too few assets. And that is when we will see a fast and sustained increase in real estate prices. Our parents have seen it and benefitted from it in earlier moments, now is our time to invest in Real Estate and earn long term. So, if you have some liquid funds, keeping it like that is sure to erode its value. However, investments in Real estate when economy is tumbling, is sure to help you make a fortune.

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