Is it wise to invest in Indian Real Estate Market in 2020-2021?

Finance Minister, Nirmala Sitharaman presented the Union Budget 2020-21 on 1st February. Here are the highlights of the budget for the real estate sector:

• The deductions on affordable housing were allowed on housing loans sanctioned on or before 31st March, 2020. To ensure that more people avail this benefit and to further incentivise the affordable housing, the date of loan sanction has been proposed to be extended by 1 year and a tax holiday is being provided on the profits earned by developers of affordable housing project approved by 31st March, 2020 to boost the supply of affordable houses in the country.

• Currently in real estate transactions, while taxing income from capital gains, business profits and other sources if the consideration value is less than circle rate by more than 5%, the difference is counted as income both for the purchaser and seller. In order to minimize hardship in real estate transaction and provide relief to the sector, it has been proposed that the limit be increased from 5% to 10%.

• Rs 100 lac crore would be invested on infrastructure over the next 5 years across various sectors like housing, basic amenities, energy, healthcare, educational institutes, transportation, logistics and warehousing, irrigation projects, etc.

According to CNBC.com, the year 2019 was a period of many highs and lows for the Indian real estate market. The ongoing NBFC crisis resulted in a liquidity squeeze and the slow pace of recovery in sales. However, on the positive end, the successful launch of India’s first Real Estate Investment Trust (REIT) opened new avenues for investments while multiple positive government initiatives provided a much needed relief to the sector. As per ANAROCK research, the housing sales value of India’s top 9 listed players touched a whopping Rs 108B in the 2nd and 3rd quarters of 2019, amounting to a 5% growth QoQ. Housing sales in 2019 saw a modest 4-5% annual growth with over 2.58 lac homes sold during the year. New housing launches in 2019 saw 18-20% annual growth and developers are hoping that sustained efforts of the central government like additional deduction on loan interest, GST rate cut, alternative investment fund for stalled projects and changes to credit guarantee scheme would strengthen the sector, especially affordable housing-led growth.

In 2020, the government’s stressed asset fund is expected to play a key role in fulfilling last-mile funding for liquidity-hit stalled projects, according to an assessment by CARE Ratings. According to experts, residential growth in 2020 will mainly depend on the swift on-ground implementation of some of the previously-announced sops. If not, then buyer sentiments will be impacted negatively. Second half of 2020 will see the most traction for the real estate sector and only the financially stronger players will stay ahead in the game. It  is also expected that many large real estate companies will witness multiple IBC-led resolutions. Hopefully, with this buyer sentiment will improve and also revive demand of housing units in NCR and Mumbai-MMR.

Here, in this blog, we share the outlook of realty investments in India for 2020 and help answer the crucial question of, “Should I invest in real estate in 2020-21?”

What is Real Estate Investing?

Real estate investing needs a different strategic approach than purchasing a property for personal use. When you choose real estate as an investment strategy, you purchase a property to make a profit on it. In most cases, the investor rents out the property or resells it at a higher cost.

Just like all other investments – equities, bonds and more – you need to be aware of the ins and outs of the industry, market trends, to make smart choices that yield higher returns. If you are looking to invest in real estate this year or the next, here are some beneficial property trends to be aware of.

Following are trends for real estate investors in 2020:

• Greater Concentration of Demand

Jobs have a direct correlation in the growth of the Indian economy and changing demographics. Today’s home seekers, be it for buying or renting, don’t mind relocating to new cities if the prospects regarding employment opportunities are engaging. Most jobs tend to be service or office jobs and businesses that provide these jobs need more support services that are most efficiently delivered in big markets. IT & personnel support, office space and healthcare are more effective when they’re concentrated. And nowadays entire cities are also being built using eco-efficient technologies to reduce negative impact on the environment like Jaypee Sports City and many others. So, businesses, cluster in markets where these services already exist, which in turn concentrates the services even more, making the markets even more attractive. What this means for investors is that demand for housing in big markets almost certainly will continue to grow faster than builders can create more supply which will eventually escalate prices and rents.

• Slowing Home Prices

Between now and 2025, India will be part of nations which will account for 72% of the expected construction activity across the world. This means better infrastructure and improved connectivity and thus high standard of living. This also leads to bridging the gap between metro cities and their small town counterparts. Global Construction research also shows that by 2025 India will have 1.1 crore annual average house completions on an average. So real estate is set to develop at a global scale and prices in real estate also go through a high and low period. Investors can make invest during slow home prices which wil  prudent choices based on their budget and personal preferences.

• Bigger Gap Between Owning and Renting

The surge in home prices in recent years, especially in many of the big markets, puts a house beyond the reach of more people. This is good news for investors in rental property but also means that it’s difficult to just buy a home and rent it out: the number of people who can afford the high rent is small. A better strategy in these markets is to split a home into several rental units, even though that takes time and money. Apartments are also a good idea, especially because rents will continue to rise, even if home prices don’t.

• Smaller Risks in Smaller Markets

Investors will want to avoid the credit risks you run at the lower end of the investment price range, physical location is even more important, and you can’t count on rising prices to flesh out your expected return – you must drive a hard bargain. But the ratio of prices to rents will often be in your favor, your investment won’t cost an arm and a leg – and you probably won’t have much competition. Research shows that fast growing cities will drive high risk high rewards in emerging economies.

Current Property Trends that Favour Real-Estate Investors

The rise in Demand for Emerging Micro-Markets

Micro markets like Bhiwadi in NCR, Halol in Gujarat, Jamshedpur, Jaipur, Jodhpur, Sohna in Gurgaon, Airoli in Navi Mumbai, Pirangut in Pune and Madhapur in Hyderabad witnessed huge demand for residential homes. Real-estate experts predict that 2019 and 2020 will be the years of emerging micro-markets, with huge demand for quality residential homes as industry and economic opportunities grow in these micro-markets.

Impacts of the Real-Estate Reforms of 2017

Real estate is one of the major contributors to India’s GDP and has grown to Rs 12,000 crore (US$ 1.72 billion) in 2019. The market saw several progressive policy reforms in the last couple of years. While it’s true that most of these reforms were taken back in 2017, the impacts were seen largely in 2018.

The three major reforms – the introduction of GST, the launch of RERA and the grant of infrastructure status to affordable housing properties – have had a massive and positive impact on the industry. The government’s vision of “Housing for All by 2022,” and the grant of infrastructure status to compact, affordable residential homes saw an increase in the demand for low-cost homes.

The RERA (Real Estate Regulation Act) was introduced in 2016 to bring uniformity in the real-estate market and to protect the interests of buyers from the malpractices of unfair builders. Today, the results of the RERA can be seen – it has increased transparency in real-estate deals, improved accountability of builders, which in turn has led to increased demand from buyers.

The GST was introduced in 2017 with the ideology, “One Nation, One Tax.” While there were some initial teething troubles, today the impact of GST remains largely positive. GST has made it easy to do business in the country, seeing a marked increase in infrastructure developments and other real-estate projects.

These three factors have had a cumulative effect on the real-estate industry in India and drive the rise in demand for real-estate investments.

Increase in Real-Estate Sales and Launches

Post demonetization, real-estate project launches, and sales have grown significantly. One major shift in residential realty trends is the increase in demand for mid-segment and affordable housing, compared to luxury, high-end properties.

Other factors that drove real-estate sales in the last year include – availability of a wide range of flexible payment plans from NBFCs and digital lenders, which allows homebuyers to buy properties at lower EMI and interest rates, compared to traditional lenders; income tax rebates on home loans; CLSS; no floor rise cost; discounts and freebies offered by builders.

Innovations offered by Builders

The last few years have seen major innovations in the real-estate sector. With the introduction of various reforms, the real-estate industry saw the exit of less serious players, leaving the market to the professional builders.

Furthermore, builders have strived to innovate by offering homebuyers theme based projects like – comfort homes, senior homes, kid-centric homes, and more. Buyers can choose from several themes to choose projects that are a perfect match for their lifestyles. Additionally, amenities which enhance the value proposition of the offerings, like smart lighting, 24×7 CCTV surveillance, power back-up, clubhouses, swimming pools, outdoor parks etc. which were considered a luxury a few years back, have become mainstream now.

The Rise and Demand for Integrated Townships

With property prices sky-rocketing in the cities and stagnant economic development opportunities, more and more Indians are looking at Tier-II emerging cities. These cities not only present an affordable alternative to the metros but also have the infrastructure and other factors working in their favour.

Due to the availability of huge land parcels at Tier-II emerging cities at affordable rates, developers can construct high-quality residential homes and townships at competitive prices, compared to cities.

How do these Trends affect the Real-estate Investor?

To put it in a nutshell, the residential market has seen a significant rise in demand and shows positive investor sentiment. Buyers and investors who were earlier undecided, are now actively looking for homes, as the overall real estate market in the country has seen an upward movement.

Developers have also undergone major transformations, and leading and most trusted developers are looking to provide their valued clientele with added value and holistic living experience.

Coming to the big question,

Is it wise to Invest in Real Estate in India in 2020 and 2021?

A big YES! Considering the various beneficial real estate trends listed above, experts are optimistic about the future of the real estate industry in the country and look forward to brighter days. As all buyers are aware that land is a scarce resource, and fundamental supply and demand principles dictate that with higher demand and lesser supply, property prices are sure to go up. 2020 has great potential for both residential and commercial real estate business. In the last few years, co-ed office space has gained impressive traction in most cities with IT/ITeS players contributing to the majority of the demand. Occupational inter-state migration is driving growth for the commercial sector which in turn translates into higher residential demand. Practical millennials are more inclined towards co-living spaces that is more dynamic as compared to the usual rented space. As per research conducted by Global Real Estate Consultants Knight Frank, the novel concept of co-living is gaining widespread acceptance in India and this trend is acting as a catalyst for an organised rental market in cities such as Bengaluru, NCR and Pune in the same way as co-working spaces did for the commercial space. Also, the impetus given to the residential sector is expected to yield positive results for buyers and investors alike. In 2020, the Indian real estate system will exhibit more financial discipline, accountability and transparency due to the structural economic policy reforms introduced last year. Experts believe that if the government takes more quick and bold corrective measures for the housing and urban infrastructure sector demand can be boosted to an unprecedented level.

So, if you are looking to add real estate to your investment portfolio, then now is the perfect time to get started.

Bhiwadi real estate market 2020-2021

In addition to all these, another thing that makes Bhiwadi a promising real estate investment hub is the soon to be operational RRTS project. The regional rapid transport system (RRTS) is planned to cover Delhi-Gurgaon-Rewari-Alwar region. Thus ensuring good connectivity via world class commuter transit services.

The future of the real estate market in Bhiwadi looks very good and promising with the upcoming RRTS project. The right time to invest in Bhiwadi is 2020 as the prices of property may increase later on.

Jaipur real estate 2020-2021

Jaipur the capital of Rajasthan is developing at an increasing rate making it the hottest real estate investment option in 2020. Jaipur has a number of world class educational institutes, top class infrastructure and good connectivity to other states of India. It has recently been declared a world heritage site by UNESCO and is also one of the most famous tourist spots in India that assures you a regular flow of rental income from your property in Jaipur.

The prices of property in Jaipur are expected to rise with the introduction of RRTS as it will increase Jaipur’s connectivity to Delhi/NCR which is already pretty good because of the Delhi-Jaipur Double Decker Train. So, 2020 seems to be the best time for making a real estate investment in the Pink City.

South Gurgaon real estate 2020-2021

South of Gurgaon has good connectivity to all the major cities in NCR and offers the same amenities you may get in Gurgaon except for the huge traffic jams. It has a lot of affordable home options along with some luxury ones. The outsourcing industry in Gurgaon hires more than 5 lakh people and nearly 2 lac workers are employed by Maruti and Honda factories leading to increase in the demand for homes in Gurgaon and nearby areas. You will have a steady handsome rental income if you rent out your property in south Gurgaon. The property prices have gone up from 10-15% in the last few years and will only be moving upward from hereon making it clear investing there would be a wise option.

Indian Real Estate Market 2019 & 2020 – Wise to Invest?

Since time immemorial, land has played an important role in shaping the course of history. Great wars were fought; kingdoms were created – all in the quest for land.

The reality here is that – land never loses value or demand, and with only limited space available for a fast-increasing population, realty offers better (and guaranteed) returns compared to other popular investment choices.

Here, in this blog, we share the outlook of realty investments in India for 2019 and help answer the crucial question of, “Should I invest in real estate in 2019 and 2020?”

Is it Wise to Invest in Real Estate in India in 2019 and 2020?

A big YES! Considering the various beneficial real estate trends listed above, experts are optimistic about the future of the real estate industry in the country and look forward to brighter days. As mentioned in the beginning, land is a scarce resource, and fundamental supply and demand principles dictate that with higher demand and lesser supply, property prices are sure to go up.

So, if you are looking to add real estate to your investment portfolio, then now is the perfect time to get started.

Bhiwadi real estate market 2019-2020

In addition to all these, another thing that makes Bhiwadi a promising real estate investment hub is the upcoming RRTS project. The regional rapid transport system (RRTS) is planned to cover Delhi-Gurgaon-Rewari-Alwar region. Thus ensuring good connectivity via world class commuter transit services.

The future of the real estate market in Bhiwadi looks very good and promising with the upcoming RRTS project. The right time to invest in Bhiwadi is 2019-2020 as the prices of property may increase later on.

Jaipur real estate 2019-2020

Jaipur the capital of Rajasthan is developing at an increasing rate making it the hottest real estate investment option in 2019-2020. Jaipur has a number of world class educational institutes, top class infrastructure and good connectivity to other states of India. It has recently been declared a world heritage site by UNESCO and is also one of the most famous tourist spots in India that assures you a regular flow of rental income from your property in Jaipur.

The prices of property in Jaipur are expected to rise with the introduction of RRTS as it will increase Jaipur’s connectivity to Delhi/NCR which is already pretty good because of the Delhi-Jaipur Double Decker Train . So, 2019-2020 seems to be the best time for making a real estate investment in the Pink City.

South Gurgaon real estate 2019-2020

South of Gurgaon has good connectivity to all the major cities in NCR and offers the same amenities you may get in Gurgaon except for the huge traffic jams. It has a lot of affordable home options along with some luxury ones. The outsourcing industry in Gurgaon hires more than 5 lakh people and nearly 2 lakh workers are employed by Maruti and Honda factories leading to increase in the demand for homes in Gurgaon and nearby areas. You will have a steady handsome rental income if you rent out your property in south Gurgaon. The property prices have gone up from 10-15% in the last few years and will only be moving upward from hereon making it clear investing there would be a wise option.