40% Consult Their Spouse Before Making An Investment, Says RBI Report

Of many reports published, it has been observed that almost 89 per cent of the household savings is in the form of assets such as a house, vehicle, machinery and the like, property forming the bulk. While prospective buyers sit back and postpone their property purchase, it has directly hit the construction sector. This again has been linked back to the credit crisis of 2008-09. With uncertain times ahead, most people then preferred to keep their finances secure than put it in real estate. However, this also reveals that real estate then and now, is still the bulk of most investors' profile. Here are some interesting findings in the Reserve Bank of India's (RBI) latest report on household finances:

Consulting the better half to make the best choice

In a report released by the RBI in August, 2017, a survey question read, What or who do you depend on the most for a financial advice? Of the respondents, 40.5 per cent said they consult their spouses, while 30 per cent take their own decisions, 25 per cent do not mind seeking advice from friends, family and neighbours while 1.4 per cent turn to banks and financial institutions. Informal savings and lending groups are an option for 0.2 per cent of participants while the radio, television, religious institutes, insurance companies cater to 0.1 per cent of such investors, respectively.

Our take: While you have plenty of options available, do not take an emotional decision when buying a home. Consult various credible sources including online advisors, experts and then park your money where data proves it is fit.

Real estate and education

“Higher education is unambiguously associated with a lower share of real estate, and higher shares of both pensions and financial wealth. This finding suggests that education more generally (rather than financial education more specifically) has the potential to improve financial allocations, but may also be a proxy for the fact that higher education is correlated with employment in the formal sector - with fewer opportunities for tax evasion, and more exposure to formal financial markets,” says the RBI report. Naturally, it becomes safe to assert that while some spend more on their education, some others prefer stability in the form of assets especially real estate.

Real estate or gold?

In its report, the RBI states: “Conditional on age levels and other demographic characteristics, households in the top quintile of wealth have a 50 per cent higher share of real estate and a 30 per cent lower share of gold in their portfolio of assets.”

But, given that the real estate is growing at a slow pace, are we prepared to invest?

As per Trading Economics, a market research forum, the household income of Indians have climbed significantly during 2006-2016. The Ministry of Statistics and Programme Implementation showed that while Indian household income (combined) amounted to Rs 9,944 billion in 2006, in 2016 it was Rs 26,099 billion. We cannot overlook, however, the growth in population between these years.

On all other parameters, the data as on August 2017 looks like this:

• The consumer confidence, that studies the spending and saving intentions of a person, has deteriorated and stands at 128 while the previous highest was 136. The lowest recorded ever was 92. The count 100 stands for neutral and anything more than 100 is seen as positive.

• Consumer spending has touched Rs 18,483 billion as against the previous highest of Rs 17,809 billion. The lowest recorded was Rs 4,469 billion.

• Disposable personal income stands at Rs 15,49,65,120 million, up from the previous highest of Rs 13,81,92,890 million.

• Personal savings are at Rs 26,099 billion, up from the previous Rs 25,429 billion.
• Bank Lending Rate stands at 9.55 per cent.

• The MNI Consumer Sentiment (provider of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets) stands at 112.70 while the previous recorded was 111.60. The highest recorded was 133.70.

• Household debt to GDP* stands at 10.20 per cent of GDP.

The metrics look like we are heading just right but the motive to wait and watch might pull Indian real estate down. 

*GDP: Gross Domestic Product