Most share market investors may return to the properly market – and it will be a more stable, more transparent and more logical real estate market.
Indians primarily invest in three options: property, equities and gold jewellery. In the last three-years, property started to be perceived as being ‘down’ with most investors opting for equities. The global scenario led to a sharp drop in share prices. This coupled with the Budget proposing Long-Term Capital Gains (LTCG) tax at 10 percent will nudge investors back to real estate. The quantum of investment that will exit equities will mostly end up in the property market.
Property investment is both a long-term goal as well as an emotional asset for the buyer who wishes to have a house of his own. From a return on investment perspective, whether one buys for personal use or as an investment option, one must not wait to buy real estate. Rather the correct option would be to buy real estate and wait. The returns will definitely follow.
I see the importance of sharing this adage in light of the circumstances over the past one-year which saw a slowdown of sorts in the realty space and potential buyers and investors largely turning ‘fence sitters’. The current scenario is best to enter the property market given the easy availability of home loans, low home loan interest rates, bank recapitalisation ensuring availability of funds for home loans, flexi banks norms for loan sanction, wide array of choices to the buyer due to surplus stock in the market coupled with some really good bargains from developers, among others.
Going forward, we expect investments in the realty market as property prices have reached rock bottom levels and one sees no scope for any further reduction in prices. In this scenario, one can expect the property market to register growth. Real estate is a sure and secure investment option. Equities at present are facing huge volatility. Experts feel that most share market investors will return to the property market as it will be a more stable, more transparent and more logical.
Real estate in India underwent a paradigm change beginning with demonetisation which effectively pointed it away from cash transactions as also black money. Demonetisation happened towards the end of CY16, that coupled with the imminent implementation of Real Estate Regulatory Authority (RERA) and Goods & Services Tax (GST) resulted in a major slowdown in real estate sales. It was a domino effect as by the time RERA was in place, it was time for GST to be implemented. So, till July 2017, things were very slow across segments of Indian real estate.
Now that the impact of the new regulatory regime has worn off, things are returning to normal – albeit under the new paradigm. Fence sitters are turning into actual buyers. The festive season in 2017 started on a positive note. Across buyer segments and multiple locations we are seeing the return of the home buyer. As we enter May, positives are making their presence felt. Now things are improving even more with transparency because of RERA and GST ushering in a single tax rate across the nation. These reforms have boosted sentiment and will enhance the attractiveness of real estate as an asset class for investors.
I see sentiments and eventually sales improving in the next 6-12 months. The reasons being strong economic drivers, acceleration in reforms, high yields and a rapidly modernising business base. In this scenario, real estate offers a dual advantage: 1) The scope for capital appreciation; and 2) If one does not stay in a residential real estate unit, it offers scope for rental income. Real estate is fast returning to its position as an ideal option to grow wealth as one can take advantage of historically low equated monthly instalments (EMIs) and create wealth through real estate. When it comes to making a smart decision in terms of investing in real estate, those who spot the potential in the present day will be making the right choice.The author is founder and Managing Director of Hiranandani Group and National President - NAREDCOGet access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.