Indian household wealth (about 77 per cent) is primarily held as real estate, as per Reserve Bank of India data. However, this asset has not been appreciating for nearly a decade and there have been multiple attempts to call the bottom and predict a revival. These did not pan out well in the past due to various reasons, including the long-lasting pandemic. Will this year be different? And what are the macro trends in the market that buyers can keep in mind when looking for new opportunities that can pay-off when things turnaround eventually?

Rental revival

Rental, especially in the residential segment, has not been an exciting theme in the past. This is because the property market has been a pure capital appreciation play and rental returns were paltry. With rising property prices, rental yields could not catch-up and lingered at 2-3 per cent in most markets, even with lack of price appreciation. Owners also found that renting out a house was a hassle, as there are not many property-management firms to take care of tenant requirements. The legal rights of owners are also not very strong and violation of terms by renters is not easy to handle. So, buying to rent out was not a popular option. For a tenant, calculations on whether it is better to rent a home or own it invariably showed that renting is a better option, especially in the last few years when prices have been stagnant at best. But a few trends in the market – somewhat derailed by the pandemic which reset the rents even lower – point to a likely shift in the rent versus own dynamics.

Rents will likely go up for a few reasons. One, owners will require better return as price appreciation has moderated. Two, legal frameworks such as the Model Tenancy Act will make it easier for larger players to enter the fragmented residential rental market. Three, trends such as co-living will help unlock more value from the property and increase rent which will also help spur property demand for builders. Four, rental demand will likely go up, as many potential buyers may defer their purchasing decision due to being cautious about their financial stability, coupled with lack of urgency to buy in a slow property market.


A property – similar to physical gold – was seen both as something that had end-use, but was also a store of wealth. But with financialisation of assets, this is shifting and pure investors are moving away from properties that are suited for end-users towards more efficient options. For example, rather than buy under-construction apartments at low prices – which in-turn pays the construction cost of the builder – they can opt for real estate private equity funds which are Alternate Investment Funds (AIFs).

Likewise, owning property as a long-term investment to keep up with inflation can be better done through Real Estate Investment Trusts (REITs). There are also fractional property ownership options which require only smaller investments but still build a more diversified portfolio of different types of properties and locations.

So, the market may see less speculation in physical asset – due to high cost and availability of other options – and demand driven more by end-users. This should support a steady growth over the long-term, once the current imbalances bottom out in the short-term.

Specific products

Rather than build generic homes, builders are moving to specific themes and demographics. For example, senior living has been a growing trend in the last few years and has seen good demand and increasing prices, even as the broader market faced headwinds. Likewise, student living spaces is another theme that is seeing interest.

There are also mixed-use developments – where residential, retail and office spaces – are in the same complex. These self-contained communities are also seeing interest. These specialized projects typically help a developer stand out and create a Unique Selling Proposition (USP), and demand a premium. As consumers evolve, there may be demand for more nuanced built-spaces and these new themes can provide opportunities for good returns.

NRI factor

Even with a sober outlook, Non-Residential Indians invested $13.3 billion in the Indian real estate market in FY21, up from $12.5 billion in FY20, as per 360 Realtors. But this may be a trend that could reverse, atleast in the physical assets segment, due to a few factors. One, various travel restrictions due to the pandemic have made it difficult for NRIs to manage or sell their property, making them rethink issues with physical ownership. Two, property returns have not been stellar and many may be hesitant to call the bottom yet – especially when there are other investment options such as equity. Three, even if returns from property are good in INR terms, they may not see the full benefit in foreign currency - with global interest rate outlook, it is likely that the gains may be eroded by currency depreciation. There may be some shifts going forward, with implications to certain property types and geographies that get a higher share of NRI investments.

The author is an independent financial consultant