The Eternal Story of Real Estate
Everyone has a strong view on India’s residential real estate market. Currently, most people expect prices to crash. I disagree. I believe that while prices will – at worst – continue falling. I don’t think they will ever crash overnight to a panic-led collapse. Real estate is going through a painful business down-cycle, which will also end at some point of time. Those expecting an overnight crash any time soon will be disappointed.
Here’s Why: An Outlook
• The real estate sector is expected to touch US $ 180 billion by 2020 in India.
• The Construction development sector of India has received FDI equity inflows of US $ 24.1 billion in the period April 2000- June 2015.
• In August 2015, the Union Cabinet approved 100 Smart City projects in India.
• Government has raised FDI limits for townships and settlements development projects to 100%
• Real estate projects under SEZs are also permitted to 100 per cent FDI.
• Under the Union budget 2015-16 government allocated US $ 3.72 billion for housing and urban development.
• Government has also released draft guidelines for investments by REITs in non- residential segment.
1. Too Big to Fail !
There are simply too many vested interests in real estate to allow it to slip into panic-led chaos. Politicians, real-estate developers, banks, NBFCs– all of them have too much at stake. Then there are hard-working, salaried employees paying EMIs. This is an industry which reaches a majority of India’s population. Like Wall Street in the USA, India’s real estate industry is too big to fail. At worst, it might see a Lehman-like moment. A few builders will vanish but, as Wall Street figured out, a few casualties – like a Lehman or an AIG – are acceptable collateral damage in the overall scheme of things. But the Government will cobble together a bail-out of sorts. Builders will be rescued, homes will be saved.
2. Today vs Tomorrow !
There are two facets to every situation if today there are uncertainties then tomorrow there would be opportunities to overcome them. Today if the current sentiment in real estate is inert because of uncertainty of security of capital invested in context of capital appreciation then tomorrow stands with the realty sector because of its buoyant nature which would certainly overcome this momentary phase. There have been positive signals in terms of Inflation which has been falling for the past one to two months and the RBI has hinted on cutting interest rates further if the situation is maintained. The economy is recovering and government too has taken steps to support the real estate industry. The seeds have been sown in terms of key policies by government so that Indian realty can stand tall like a global real estate powerhouse of tomorrow.
3. Evergreen Sector
The demand for homes is something which is here to stay. It is eternal! One always needs a space to dwell. Looking at the current scenario where a segment of second time buyers are cropping up one can’t say that there would be slack in the sector in the long run. The demand for homes is ever growing giving a boost to the supply of property in the sector.
Every business sector witnesses uncertainties on the sidelines of unique and integral economic complexities to which Indian real estate is not an exception. Real estate is an essential ingredient in formation and growth of any economy. There is a direct relationship between growth of businesses and economy which stands in a limbo without Real Estate sector.
4. The Pertinent Question
Owning a house is one of the ultimate dream of a person. The investors, end users and buyers often face the pertinent question as to where to invest their hard earned money.
Here is an excerpt from the Jones Lang LaSalle (JLL) report on real estate that lists the locations that illustrate the answer in context of individual cities and specific localities.
•Noida & Greater Noida – National Capital Region (NCR)
•Thane- Mumbai Metropolitan Region (MMR)
•Navi Mumbai- Mumbai Metropolitan Region (MMR)
•Southern Suburbs- Chennai
•Viman Nagar and Nagar Road- Pune
There are many factors that contribute to the all-round development of a location to make it a hotspot with sustained price growth over a span of time. As per JLL assessment, these locations offer a humungous spray of investing options in real estate with their relatively lower price levels that provides for a stimulus for future capital appreciation and healthy returns.
These hotspots offer good investment options with property price appreciation likely to vary depending upon the rampant risks associated with the respective location and their environs.
The discounts on property prices in these hotspot locations depend upon developer profile, asset class and construction status of the project.
5. The Rewarded Risk
In realty there is a reward attached to every risk. Therefore, every minute is a correct time to decide and invest in real estate because there is reward of appreciation of capital with it. The real estate sector might undergo a sluggish period but ultimately it follows the upward trajectory. The sector might witness idleness for a while but it is Phoenix like – the emblem of immortality.
So, buy now, invest now! The unending realty story begins with your home …
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