A few days back, Central Government benefitted its employees by accepting the recommendations of 7th. Pay commission. The government gave a generous rise of around 25 % of the current pay structure of its employees and retirees. The recommendations of the commission will come into force from 1st. of January 2016 and accordingly, the arrears of proposed hike will be given from this date. The payment of arrears is expected to be disbursed before beginning of festive season i.e. by the months of September-October 2016. A sum of around Rs. 1.02 lakh crores will be disbursed among one crore employees and retirees of the central government.
The employees will get a substantial amount as arrear payments and with such fat disbursements, they would go for some suitable investment opportunity. There are many investment options such as Bullion, Share market, Bank Deposit and Real estate etc. are available with them and amongst these options, Real Estate is the first choice of investment for government employees, after the hike announced in the 7th Pay Commission.
Real Estate has emerged as the first choice for investment, among serving government employees, as well as those who have already retired, with close to half of the employees in 20 cities of India, preferring to invest in real estate, following the 7th Pay Commission’s salary hike. As many as 44% of government employees across the country, wish to invest the entire salary gains into the Real Estate market. These are the findings of an exhaustive survey on consumer behavior patterns of government employees.
The major findings of the survey are:
44% of the government employees would invest the benefits of the 7th Pay Commission into the real estate.
34% of the respondents would invest in financial schemes for retirement gains; 12% to save money for education and marriage of children; and 10% would opt to upgrade their lifestyle.
Contrary to the general perception that youngsters drive the property market, officials who are close to retirement, are more inclined to invest in property (as many as 78%).
Metro cities with expats to attract more government officials (68%) into the property market.
Peripheral locations and emerging markets are likely to attract more government officials (68%) in Real estate sector.
Lack of affordable housing and the possibility of inflation, are the major deterrents for investing in real estate.
Preferred locations
The study found that the main city areas are likely to benefit less, as compared to the outskirts, owing to affordability, the urge for a relaxed lifestyle amidst open spaces and appreciation potential. With retirement in mind, as many as 74% of those who are investing in the property market, prefer emerging locations rather than established markets. Even those who have retired, prefer these locations, with a majority of them are already living in such regions.
The quest for Real Estate is more among the older generation, compared to young buyers. While one-fourths of the young generation (as many as 22%), wish to upgrade their lifestyle first and then diversify their portfolios, 78% of those above the age of 45 years wish to invest in the property market. A majority of the employees in the survey were closer to retirement and only a small set was below 30 years of age.
Investment options and concerns
While real estate emerged as the first choice of investment, 34% of the respondents said they would invest in financial schemes with fixed returns, post retirement. Education and marriage of children came next, with 12% saving the 7th Pay Commission’s benefits for it and the remaining 10% said they would like to upgrade their lifestyle. The survey noted that nearly all of the respondents wish to avoid speculation, even with their investment in the property market.
As many as 74% of those planning to invest in property, did not have a house of their own, while 22% said they would be investing in a second property for rental income. Only 4% said they would invest in a weekend home.
Less than one-third of the respondents (30%), felt that the 7th Pay Commission’s benefits would improve consumer sentiment. The biggest deterrent to investing in the property market was the absence of affordable housing options (55%), while 45% were apprehensive that inflation would eat up the benefits.
The survey demography was a carefully chosen mix of government employees across the hierarchy. The survey was carried out in Delhi, Noida, Gurugram, Ghaziabad, Mumbai, Pune, Nagpur, Nasik, Ahmedabad, Bangalore, Chennai, Hyderabad, Coimbatore, Kochi, Kolkata, Bhubaneswar, Jaipur, Bhopal, Lucknow and Patna.