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Real estate is the new gold for investors

Friday, October 06, 2017

According to a recent report of the Household Finance Committee, published by the RBI, as households get rich, they opt to channel their savings into property investments rather than buying gold. Suraj Uchil explores the trend

Growing up in the nineties, one of the most prominent lessons we ever got was to invest in gold as much as we can. I still remember how vividly happy my mom was when I had won fifty gram gold in a newspaper contest. For them gold was the ultimate form of security. My mother used to joke that if at all bad times fell on our family god forbid, these gold would be our saviour. But it’s 2017 and that scenario doesn’t ring a bell now. In the past decade or so, there has been an ideological shift in the minds of the people.

Golden change
More than gold, people are now using their savings to buy properties. This has been found in the Report of the Household Finance Committee, published by the RBI (Reserve Bank of India) in the month of August. According to the report, as households in the country get rich, they opt to channel their savings into property investments rather than buying gold. This can be perceived as a good move for the real estate market.

Sachin Mirani Secretary, MCHI Thane Unit, says, “I have been witnessing this norm for the past decade or so. Families today don’t want to put their savings in a locker. They would rather buy a property and make it an asset. At the same time, they don’t have to give up on their lifestyle either. So it’s the best option for them to invest in properties rather than keeping it hidden safely in the locker till eternity.”

Echoing the same thought Sandeep Sadh, CEO, Mumbai Property Exchange Pvt. Ltd. explained that with the boom that the real estate market has seen in the past several years, it would be a simple choice for families to secure their savings and mobilise it in buying an asset. “Hardly anyone in the last decade or so would have chosen gold over property. Also, in the past five years, gold hasn’t appreciated in value as much it should have. It’s almost hit a stable ground. Whereas property rates get appreciated almost every other year.”

But another aspect of the report shows an alarming trend in our country. According to the report, majority of the people buying or investing in the properties are middle-aged people. Which means many of them would either have spent all their savings on the property while having nothing left for their retirement days or worse, some would still be in debt while in their retirement and that would be a very risky affair. The lack of youngsters venturing into the buying property segment seems to be a cause of concern which needs to be tackled soon.

Generation gap
Ashraff Khan,a professional from Navi Mumbai, feels that the current generation has a different idea of leading their lives as compared to their previous generation which is one of the biggest reasons for them not getting into property hunting at their age. “This generation doesn’t want any unwarranted risks and buying a property in a city like Mumbai on loan for 30 odd years seems like a risk we could definitely avoid. We also have a different kind of a lifestyle today which leaves practically no space for the kind of savings required to buy properties. We do our own kinds of savings but the idea of putting a huge chunk of money into the bank as EMI every month so as to spend only 8 -10 hours a day in that place sounds a bit absurd.”

“As the standard of living gets better and better, this generation’s need of owning their own house is taking a back seat. Also they would rather stay in a rented apartment which allows them flexibility, rather than stick to one particular place for ever. Furthermore, the most important reason why the young generation now doesn’t get into property purchase is also because of job security. Unless they have an assurance of job security, they will and should not plunge into debt of loans,” adds Sandeep.

So in order to lower the risk of getting into debt during one’s retirement age, it’s beneficial to start investing at a much younger age. But in order to do that a certain level of job assurity and security is required. “This is where the role of the government becomes so important. They have bought tremendous reforms in the real estate sector in the past 3 years. More than what I have seen in the past ten years in fact. But their job doesn’t end here. They need to make sure that the reforms work and also at the same time work on making better infrastructure as that will bring in more jobs and that will leads to a sense of security that people require now,” concludes Sachin Mirani.

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