Why It is The Right Time To Invest in Real Estate
The Indian real estate in Mumbai was in a state of transitions, after the recent of reforms by the government. However, home buyers and investors are now in a win-win situation after clarity has emerged on the impact of reforms such as demonetization, the Goods and Services Tax (GST) and the implementation of the Real Estate (Regulation and Development) Act (RERA). The results have brought in more transparency and confidence among all stakeholders.
How do you know whether it’s the right time for your entry in any investment channel? Is it the juncture when the markets are flourishing, and everyone is joining the fray? Probably, not! Well, if you are on board, we would further explain why 2018 should be the year, you should enter the real estate market.
How MahaRERA Changed Things
With the MahaRERA in place, developers are now focusing on completing their existing projects. The overall number of project launches have gone down by more than 40% in the first nine months of the current calendar year. These trends imply that the supply side from real estate developers will gradually find some equilibrium with demand, and prices will subsequently start picking up pace.
Effect on Loans
When it comes to home loans, the excess liquidity in the banking system have led the RBI rejig the key lending rates. Hence, the home loan interest rates that were recorded at around 9.5% a year in 2016, have now been floating in the range between 8.3-8 %. Also, considering the average annual rental yields at 5%, there is not much difference between the costs of rent and owning a home.
Beyond the impact on real estate and the local economy, the reforms are also strengthening India’s standing globally, making the country more attractive to foreign investors. Be it RERA, GST, REITs, affordable housing or the sustained focus on infrastructure, this is one of the best times this sector has ever seen. Obviously, any such impactful introductions bring in lots of disruptions and that exactly is what we have been going through right now. This is that disruption period where there is a temporary pain and this pain currently is huge for developers. But developers are very hopeful that when the dust settles, we will have absolutely a better industry for all of us to survive and transact in.
Overall Exposure To The Real Estate Industry
Not just the PE funds from the US, Canada and Singapore are interested in infusing capital in the sector, but countries such as Japan, China, Qatar, Hong Kong and the Netherlands are also poised to invest in the sector. At the same time, global sovereign wealth funds - that are otherwise known for their risk-averse, conservative approach - have been increasing their exposure to the market and it proves that the sector is headed in the right direction.
According to Shub Ganguly, Senior VP, Sales, the Prestige Group, "The guidelines of RERA 2016 empower property buyers, while enhancing financial discipline, governance and transparency among real estate players. GST was implemented to iron out multiple tax rates among different states and usher in a uniform tax structure for the entire nation. This brings clarity to both real estate players and consumers. Going forward, factors like rapid urbanization, increased migration to cosmopolitan and Tier 1 cities and the government's focus on infrastructure and affordable housing will give the required impetus and push to the real estate sector."
In overall, the current environment presents an opportunity to buy property and make the best out of the coming year.