Here’s a lowdown on what exactly is consumer sentiment and how does it work in the realty sector
BS Manu Rao
Recession, stock market crash, job uncertainty the economic climate almost turned ‘consumer sentiment’ into a household term. Be it a stock broker, car dealer or real estate agent, consumer sentiment is a yardstick. So, what makes consumer sentiment relevant in the realty sector? Would a justmarried couple analyse consumer sentiment in the market before going in for a flat they now need? Most significantly, how relevant is this factor in the case of a property investment?
First-time buyer perspective
As a city grows and the population increases, owning a home becomes a basic necessity. Rents keep increasing in the central areas. As the rent one pays to stay in a locality with given attributes keeps increasing, there will come a time when the amount being paid as rent will add up to a home loan EMI. In other words, it would make more economic sense to buy a home and pay EMIs than pay a considerable amount as monthly rent.
Over the years, a home turns into more than an asset. It grows into a legacy. It is to most an inheritance they gift their children. ‘Creation of asset’ in this context is different from building an equity investment portfolio. For a first-time buyer, the priorities need to be budget and location. The flat or villa has no meaning as an asset class in the near term as any value assigned is only of academic interest. It is bought to live in and assumes significance as an investment only many years later. In the near term, it is an asset that cannot be cashed. Therefore, it makes more sense to buy in a correction phase than when the ‘consumer sentiment’ pushes the market, and prices, up.
Investor perspective
For high net worth individuals, property is an asset class that adds stability to a portfolio. It is also a safe avenue to park surplus funds in. Property investments pay handsome capital returns over a long term. Also, capital gains from residential property investments can be reinvested in property to avoid the tax in the hands of the investor. This apart, property yields definite rental returns that can be used to invest in other avenues. The rental income can, in cases of a potential commercial property, be discounted for finance.
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