How wise is it to invest in real estates in the coming years?

The budget in respect to real estates:

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

Housing loans licensed on or before March 31, 2020 are eligible for the exemptions on cheap homes. To ensure that more people benefit from this incentive and to further incentivize cheap homes, the deadline for loan approval has been implemented to be prolonged by one year, and a tax holiday on income received by designers of affordable housing projects approved by March 31, 2020 has been proposed to improve the supply of affordable housing in the nation.

Usually, when taxing income from capital gains, company profits, and other sources in real estate transactions, if the consideration value is less than the circle rate by more than 5%, the difference is counted as income for both the buyer and the seller. The cap has been suggested to be raised from 5% to 10% in order to reduce suffering in real estate transactions and provide relief to the industry.

Over the next five years, Rs 100 crore will be spent on infrastructure in various sectors such as housing, basic amenities, electricity, healthcare, educational institutes, transportation, logistics and warehousing, irrigation projects, and so on.

Trends that follow:

As we all know, the pandemic has hit the housing industry in ways that could not be imagined. Some of the ways that the impact has been made are as follows:

  • Housing inventory has dropped by up to 39%.
  • Between January and October 2020, the average home spent 65 days on the market, two days less than the previous year.
  • Housing prices increased by an average of 3.4 percent nationwide through October 2020, but only by 1.4 percent in the top 50 metro areas.
  • Older millennials made up the largest generational community of buyers (25 percent).
  • The concentration of demand have risen
  • The growth of the Indian economy and changing demographics are inextricably linked. Today’s home buyers and tenants are likely to move to new cities if the possibilities for job opportunities are appealing.
  • The gap between owning and renting is becoming bigger

The person who has excess funds buys the property and then divides it in certain parts and rents them out. As the rent is comparatively small, people who have lesser funds can get the apartment to use. 

  • Slowing home prices
  • Less risks in smaller markets
  • There has been a rise in demand for the micro emerging markets

Residential homes were in high demand in micro markets such as Bhiwadi in NCR, Halol in Gujarat, Jamshedpur, Jaipur, Jodhpur, Sohna in Gurgaon, Airoli in Navi Mumbai, Pirangut in Pune, and Madhapur in Hyderabad. As industry and economic opportunities expand in these micro-markets, real estate experts expect that 2020 and 2023 will be the years of emerging micro-markets, with huge demand for quality residential homes.

  • The real estate reforms and the transformation and innovation brought in by the builders and designers
  • The demand for integrated townships like Kribhco, ONGC, etc are rising

This is our attempt to break down the trends in a way for the investors to know how to go about in the real-estate investments. On one hand where the prices of the houses are going up, the rental prices are decreasing. A lot of changes have been brought in in the sector like the emphasis on REITs investment. Real estate investment trusts have now been introduced in the investment industry and taken into serious considerations by investors as they have benefits of their own. They are enabling people with the option to invest with the minimum required amount and still own their parts in the well-built real estates in prosperous cities. REITs now have new investment prospects, and the sector has benefited from a slew of constructive government initiatives.

According to ANAROCK study, the housing sales value of India’s top 9 listed companies reached Rs 108 billion in the second and third quarters of 2019, reflecting a 5 percent year-over-year rise. With over 2.58 million homes sold in 2019, housing prices increased by a modest 4-5 percent year over year. Developers are hoping that continued efforts by the central government, such as additional loan interest deductions, a lower GST rate, an alternative investment fund for stalled projects, and changes to the credit guarantee scheme, would strengthen the sector, especially affordable housing-led development.