“Transparency in the initiatives in the real state sector and assured high returns on investments, are the major factors that have wooed Non-Resident Indians (NRIs) back into the property market in India. As per a study conducted recently by a private agency, investments by NRIs in the real estate sector stood at a mere 6% in the financial year 2014-15. However, this figure has nearly doubled to reach the 11 % mark in the current financial year”, says Dr. Nikhil Sikri, CEO & Co-Founder, Zolostays Property Solutions Pvt Ltd
Buying a house on your own is one of the biggest decisions for an individual. As compared to other investments, the return on investment is lower in real estate these days, but so is the risk. Not to forget that buying a house isn’t something you can decide within a few days. It takes a lot of research and financial commitment from the buyer.
Since the second half of 2016, the real estate sector has seen a huge downfall. After the implementation, the Real Estate Regulation & Development Act, 2016 (RERA) has acquired a changed and directed framework in the Indian real estate sector. Despite the fact that the execution of RERA is still in its initial stage, the fate of the Indian Real Estate depends on how the buyers look at it in the next few months. The new administrative system, however, adds to a simplified and rearranged taxation system (GST). For buyers and developers, it is as still a battle to adapt to the administrative changes. In any case, for buyers, this is the perfect time to invest in real estate.
According to the Centre for Monitoring Indian Economy, new project launches by developers have decreased by 29% and from the last period by 60%. Mumbai is one of the major cities that has been affected by the current scenario in the real estate sector. According to some reports, over 40% of the flats in Mumbai have no buyers. For the same reason, many developers have put on hold new project launches in order to gauge the impact of RERA. Property prices have fallen or have been stagnated in many cities, especially where the investment demand was the driving mechanism of the real estate market. That being said, it still is a buyer’s market as the availability of affordable homes have increased. Government has implemented many such schemes to lure more buyers and it could be beneficial for the buyers and help the real estate market as far as the liquidity crunch is concerned.
Due to lack of liquid funds, a lot of projects had to be stopped midway and new projects were postponed till the market shows any sign of improvements. Millennials prefer renting over buying, that is why student housing and co-living communities have made their way to the top. While the traditional real estate market is struggling for new buyers, developers are looking the other way and shifting their focus to student housing projects. Co-living is a fruitful business opportunity as buying requires a commitment that most people find difficult to commit to. This is why the next few months are going to be very challenging for the whole real estate sector and the Indian economy as the real estate sector comprises over 10 % of India’s GDP.
NRIs are still betting big on the Indian real estate market
Transparency in the initiatives in the real state sector and assured high returns on investments, are the major factors that have wooed Non-Resident Indians (NRIs) back into the property market in India. As per a study conducted recently by a private agency, investments by NRIs in the real estate sector stood at a mere 6% in the financial year 2014-15. However, this figure has nearly doubled to reach the 11 % mark in the current financial year. The survey predicts that the figure is expected to reach 12.5 percent in the next financial year. The total investment by NRIs in Indian real estate is projected to reach anywhere near the range of $13.5 billion by the end of the next financial year.
Government activities to lift the real estate sector
The execution of the GST and RERA Act 2016 is a move towards shielding the interests of the buyers as well as the developers. Resale showcase purchasers got a drop in prepared to-move-in properties both available to be bought and leased, making it perfect for buyers to contribute during this difficult time. The activities of the legislature have secured the interests of new buyers by empowering them to follow the development of structures and properties at each phase until it is finished. With the administration slicing corporate duty rate to 25.17 %, real estate specialists have predicted that the move is relied upon to positively affect the area and is probably going to push interest for both buyers and developers.
Student housing and the millennials’ take on buying
Coming back to the millennial way of living, student housing has been a very target-oriented yet flexible option for investors. That is why all major real estate developers are keen toward the co-living and student housing industry. One of the pillars of modern civilization, universities in India annually register a lot of applications looking to fill vacancies left behind by graduating batches. However, the number of students studying at colleges and universities and the number of students able to access campus hostel facilities are extremely disproportionate, with the latter accounting for a meager 20% of the total volume.
Despite the liquidity crunch, the commercial real estate market has seen substantial growth in the last three quarters. Deals are moderate, and a few ventures currently look improbable to ever be finished. Since project launches were at the lowest in the last few months, investors are looking for different options to retain their investments and reduce their losses. In the diverse and fast-paced India, there has been a lack of organized shared and affordable spaces for young professionals and students. Co-living is relatively new in India but the potential of co-living in India is something no developer or investor can overlook.
One might say, the real estate sector is going through the toughest time, but from a buyer’s perspective, it still is a good investment, especially if you have a stable job in a tier 2 or tier 1 city.