Blindsided by our primitive instincts

A cave or a dug-out was a treasured possession for which men would even kill for. And be able to find mates just because of it! (much like girls checking out if their prospective mates have their own homes, today ).

Great was the pressure then to find a dug-out, where their missus would be able to rest comfortably when the man stands guard at the portals!

Real estate prices reached stratospheric levels in the first decade of the 21st century. After that, there has been a moderation. In many places, there has been an actual rupee correction in prices as of 2020, compared to what it was in 2011 or 2012. In some other places, it is a time correction, where prices may be the same or may have slightly gone up; but when the time value is factored, there would be an erosion of values in real terms. Many people do not appreciate the time correction aspect.

Major changes are underway in real estate.

A large section of people who had heavily invested in all kinds of properties wanted to forget the second decade as the lost decade, looking forward to better days ahead.

That fond hope now seems to have gone up in smoke.

First, the Covid crisis has still not receded. It looks like it may take six months to a year for things to come back to normalcy.

Secondly, work from home on a global scale is an experiment that seemed to have worked. Many companies are looking to marginally to majorly shift workforce to work from their homes.

These will result in a tectonic shift in the real estate markets worldwide. If work from home is allowed, many would shift out of congested & costly cities to smaller towns. This will also impact secondary & tertiary employment ( like maids, milkman, saloon, kirana, etc.).

Residences – Hence, it looks like residential property prices in metros and class A towns would start their slide. Correspondingly, a rise in property prices & upscale developments in Class B and beyond towns can be expected. Also, these residences will most probably have a work-chamber integrated into the home by design.

This is entirely desirable as the congestion in our cities would ease and development across the country would become more even.

Also, the eyewatering prices of homes will correct to more approachable levels.

Commercial spaces – The tsunami awaits commercial real estate. Is it going to be a four meter wall of water or a fifteen meter wall, remains to be seen.

Big companies globally have mentioned that the work from home can be up to fifty percent, with some tech companies allowing almost 100% work from home. Businesses can now tap talent across the globe.

That means our engineers need not any longer go abroad & visa problems will be a thing of the past. That is good & bad news.

Some of them want to go abroad and settle there. However, most employers probably are not going to invite people to their country and incur the costs. That will disappoint some.

But opportunities will open-up for talented people all over the world, which is positive. Also, this will help those who are having domestic commitments, like caring for elderly parents or raising kids, to continue in the work force.

Most companies will consolidate their office spaces and operate fewer, smaller offices. This means that vacancies in commercial spaces will increase dramatically. And smaller offices ( say 20-30 seaters ) across the country will sprout, where people can come

when they want – to work, do meetings internally or with clients, take important video conferencing calls etc. It is however going to be a challenge to keep the work-force cohesive & work as a team. But that is a fall-out that would need to be handled.

Holiday homes – There are those who buy holiday homes, with the idea of retreating to it, from time to time. The problem with this is that one will end up going to the same place, again and again. Even the most amazing property will become tiresome if holiday means that one abode, with no play facilities or other amenities, like in a resort.

Children will be the first to protest. Beyond 3-4 visits one can expect strong howls of protest! The lady will be next. In holiday homes, it may be a holiday for the rest, whereas kitchen duties would await her. Also, she will have to coordinate with the maid and sundry others, even if there is help for everything. That looks like home to her, not holiday.

So, holidays tend to be in other locations after that and the holiday home would just sit there.

It is then the man would valiantly soldier on and take his friends a few times for a break. After a point, it becomes tiresome for him too. No one goes after a few years and the holiday home waits forlornly to receive the guests, who are as elusive as a conjunction of over seven planets in the cosmos!

The property would be going to seed without anyone going there. A caretaker for property upkeep is expensive & gawd knows what he would be doing with the home all the year round!

Then it dawns that selling it may be a good idea. Only that a seller is impossible to find for these kinds of properties. And when one pops up, the quoting price takes one’s breath away, considering how low it is!

In the new scheme of things, if one can use holiday homes in the context of work from home – Great. But Holiday homes tend to be in remote areas as to be inconvenient for children’s education, as for everything else.

Hence, holiday homes continue to be a bad idea even now. There are red hot properties & destinations in India & abroad. Tying oneself to a holiday home appears sadistic, in the face of the brilliant options available.

Retirement homes – Buying retirement homes early on (10 years or earlier) is another, we have found some clients doing. Here, it must be given out on rent (which tends to be low) till one retires, when they would go to live.

By that time, the property would have aged and may need some repairs. Also, one’s likes and choices change. Who knows… the place & retirement home may not have the same appeal at retirement!

Even if Retirement home is your thing, there may be other contemporary developments that may come up over time. They may be better suited, have more conveniences and may be far better properties.

In such a situation, selling the current one may be something one may contemplate. But these properties are not easy to sell as the universe of people to whom it may appeal is limited. The appreciation in these are also going to be limited. All in all, this can be a sticky morass into which one would feel they had not waded into!

Real estate is poised for many changes. If we continue to think that real estate is the only asset that is going to give great returns & want to put money there, caution is suggested. The unreal growth that we saw in the first decade of the 21st century, may probably never be repeated, due to the fundamental changes that are underway.

Real estate will hopefully get far more affordable in the future. Like Gold, the interest in Real estate would probably never fade away. Let us just hope that we get a sense of proportion here and not be blindsided by our caveman instincts!