Negative Real Rates Real Estate Investment

Negative Real Interest Rates Push Savers To Overheated Stocks and Real Estate

  • Media Icon 18 December 2020

Indian investors, traditionally, have never really given a thought to the depreciation rate of interests and the losses they can face due to their fixed deposits. In contrast, western countries have always been thoughtful of this particular aspect. And since the interest rates have reduced to almost zero in the advanced economies, the Reserve Bank of India (RBI) has come with the latest introduction of a negative real interest rate, so that they can give a much-needed push to the Indian economy. This move is making others move out of their deposit circles that they have made, and it is making the investors turn their faces to the share market, which they have been ignoring for a long time. Also, many investors are trying their luck in the world of real estate and residential properties.

The real rate of return is the one that’s earned over inflation, and currently, the safest banks are offering around 5% for a year in fixed deposits. In contrast to this, consumer inflation in October 2020 was at 7.6%, therefore real rate of return before the taxes comes to -2.6%, and this means that inflation is eating away the value of savings given by our hard-earned money.

This means that the negative real rates are punishing the investors, and the savers are reacting to this big time. Many of the newcomers in the world of savings are new to this strategy of real rates. They are unknown to the impact of higher inflation on saving rates, which means that this decrease in the interest offered by banks is already negatively affecting the savers, especially the ones who have retired. Yet the ones who have a fair amount of knowledge and are fluent in this trend, are trying new things and adding some assets that will help them stay on the top of their price circle.

Real estate is one such lucrative sector that’s attracting investors owing to the negative real interest rates. Projects by reputed developers are generally a safe bet as they have higher chances of generating ROI.

Affordable housing projects by Mahindra Happinest in Palghar (Mahindra Happinest Palghar, Mahindra Happinest Palghar 1), Boisar (Mahindra Happinest Boisar), Kalyan (Mahindra Happinest Kalyan), and Avadi (Mahindra Happinest Avadi) are some such examples which are perfect for investments. All these projects are located in prime areas with seamless connectivity to industrial hubs. Furthermore, every project is equipped with lifestyle amenities and has been designed with quality specifications. The homes naturally attract tenants and buyers and also undergo good appreciation over time.

Besides the affordable segment, the premium and mid-premium projects by Mahindra Lifespaces also come across as ideal for investment. Mahindra Luminare in Gurgaon, Mahindra Lakewoods and Mahindra Aqualily in Chennai are some projects worth exploring in this regard.