Indian Real Estate- A Potential Investment Hub
The real estate market in India has experienced a significant turnaround over the years, and despite numerous difficulties and obstacles, the industry has successfully overcome them and has remained resilient. It is extremely encouraging to see that the Indian real estate market is being taken into account by domestic and foreign institutional investment funds, venture capitalists, and other investment companies as one of the regions for investment. Increased migration, rapid urbanization, rising income levels, and the development of infrastructure that will allow the inclusion of Tier 2 and 3 regions, among other important factors, have increased the sector’s value.
Metro areas like Ahmedabad, Bengaluru, Pune, Goa, Chennai, Mumbai, and Delhi are the most popular choices for real estate investments.
According to the Nirmal Bang Equities report, average rents for office space will rise in Mumbai (1.5%), Bangalore (2.8%), and Delhi (5.1%).
The population of the metro cities dispersed around the year 2000. As a result, several border pockets proved to be a choice for investors and buyers looking for mid-size housing on a tight budget. This resulted in a novel phenomenon whereby Tier 2 and Tier 3 cities and metro areas were seen to expand and contribute to the real estate market.
Increased Number of Investors
The economy has suffered during COVID-19, and stocks have fallen sharply due to widespread business disruption. Considering that prices are at an all-time minimum and investing in real estate is more affordable, this has increased the number of investments. In addition, the number of investors has remained the same throughout COVID-19. People have remained interested in buying rental properties, particularly move-in-ready apartments.
Interest rates and prices continue to be low to boost consumer demand after COVID-19. Due to these favorable circumstances and the possibility of successful negotiations, real estate investment has become a top choice. ICRA forecasts that Indian businesses will raise about USD 48 billion or Rs 3.5 trillion through infrastructure and real estate investment trusts in 2022.
The Development and Use of Technology
In the past, investors relied on real estate agents and newspaper ads to find their ideal residence. The pandemic, however, has more than ever catalyzed the real estate industry’s digitalization by creating a sense of urgency for the sector to use technology more widely.
Developers are increasingly embracing next-generation tools like mobile apps and online shopping carts that act as a one-stop shop for details on their credentials, offerings, price, configuration, and other pertinent aspects of their products. New techniques like virtual and augmented reality are being used to showcase their premium offerings and recreate the experience of being on the project site.
Implementation of RERA (Real Estate Regulation and Development Act) and Introduction of GST
Home buyers had other legal protections in place for a long time before the Real Estate Regulation and Development Act 2016 (RERA). None, however, appeared to benefit homebuyers as much as RERA has. Before RERA went into effect, homeowners in states like Maharashtra were safeguarded by the Maharashtra Ownership Flats Act (MOFA) of 1963. Similar to the Real Estate (Regulation and Development) Act 2016, MOFA aims to safeguard the interests of flat buyers by enforcing discipline and transparency in the sale of flats and putting a stop to fraud.
By consolidating the industry and filtering out dishonest players, RERA has restored homebuyers’ confidence in the market. Along with structural flaws, RERA requires that actions be taken in cases of workmanship, quality, service provision, or any other duty that was made as a result of the sale agreement. RERA, in other words, ensures that builders are made liable for all of their promises and offers by providing homebuyers with an effective redressal system, which other legal provisions failed to address transparently.
In the real estate industry, the GST (Goods and Services Tax) represents a significant advancement in financial transparency and can be seen as a liberation from the previous complex and opaque taxation system. Consumers can now unwind because the GST tax integrates the majority of previous taxes into one, giving them more certainty about how much a home will ultimately cost.
A Form of Investment Vehicle: REITs (Real Estate Investment Trusts)
Real estate investment trusts, popular when private equity began to invest in real estate two decades ago, started to appear this decade. REIT investments are made by combining funds to purchase a variety of properties.
Like mutual funds, REITs give investors access to commercial real estate portfolios that produce income from assets like homes, offices, hospitals, warehouses, hotels, and shopping centers.
Due to their long-term capacity to produce higher returns than equity markets, REITs have become the focus of attention. Mandatory evaluations, frequent updates, research exposure, and disclosures have all been cited as advantages for REITs.
When it comes to real estate investments, some cities experience better growth. This is due to the rapid growth they experience and draw.
In India’s top eight cities from July to December last year, the office segment reported transactions totaling 22.2 million square feet. For this period, new completions totaled 17.2 million square feet.
Bangalore is one of the best examples of this. The city has earned the moniker “Silicon Valley of India” as the nation’s startup and IT capital.
Due to the abundance of opportunities, businesses and individuals will continue to relocate here. Long-term demand for real estate will increase because there is a shortage of land in metropolitan areas but an increase in opportunities.
According to a recent research report, despite the challenges posed by the European war and inflationary pressures, the real estate sector has experienced strong growth in the first half of 2022, and the demand for homes has remained steady. This indicates the sector’s strength, resilience, and forward momentum in India.
Newer solutions are emerging all over India’s real estate market and are likely to strengthen in the future. There is an increasing demand for residential spaces that satisfy home buyers’ needs and preferences as people slowly but steadily return to the workforce and businesses and corporations adopt the work-from-home culture. For instance, homebuyers are increasingly looking for homes with spaces for a customized office setup. The changing needs are acknowledged by developers, who are coming up with solutions.
In the years to come, more growth in the real estate industry will be made possible by the government’s increasing efforts to provide affordable housing for everyone.