Real Estate Investment? HNIs Become Cautious Ever

HNI Investment in Real Estate: A Shift in Strategy

High net-worth individuals (HNIs), despite possessing substantial capital, are encountering difficulties finding suitable investment avenues within the real estate sector. The market's failure to deliver substantial returns has rendered real estate investment less secure for this demographic.

Real estate investment

Traditionally, HNIs have sought income-generating assets, remaining relatively unaffected by economic fluctuations. Real estate investment has historically been a favored choice for them.

High net- worth individuals (HNIs) always look for income generating assets. They are least bothered about the fluctuations in the economy. High net- worth individuals’ (HNIs) real estate investment was always well- known. As any others they also preferred real estate investment to all other forms of investment.

Until recently, real estate investment offered excellent returns. Real estate investment was the best form of investment up to the recent time. However, the narrative has changed, with many now reporting diminished profits in real estate transactions. Escalating property costs have significantly impacted profitability, consequently dampening investor enthusiasm.

While real estate has consistently provided high returns to investors Real estate was and had been consistent in providing higher returns to the investors, its future as a prime investment option is now uncertain. Available data suggests that the allure of real estate investment has waned.

The decline in property value appreciation, particularly pronounced in major cities and metropolitan areas, has raised concerns.

Real estate experts attribute this to prices reaching a peak, becoming unaffordable for most. This resistance to price hikes compels sellers to either reduce prices or face difficulty selling their properties property prices lose appreciation, both scenarios contributing to a decline in value appreciation.

HNIs, typically defined as individuals with assets exceeding Rs. 2 crore, traditionally capitalize on pre-launch opportunities, investing early in projects and exiting upon completion, securing substantial returns through pre-launch offers and discounts. However, recent trends indicate they are no longer able to achieve these high returns, even with such incentives.

Cushman & Wakefield’s Executive Managing Director, Sanjay Dutt, acknowledges this shift, stating, "The situation has got changed very much. He added that now the HNIs have to consider two aspects- the aspect of higher returns as well as the aspect of possible capital appreciation."

Exiting investments has become a major concern for HNIs. Due to dwindling demand, investors struggle to exit profitably. A recent study revealed that half of Mumbai's property buyers are investors. However, the sluggish market is deterring them, with many now turning to private equity and other alternatives.

The sluggish real estate market chases the investors away. Now most of them opt for private equity investments or some other similar ways other than real estate.