Real Estate Investment: Current scenario & what's new in 2015 for you?

The year 2014 was a bag full of mixed emotions and there was nothing much to excite the buyers, investors or the realtors, as a whole. However, the last quarters of the ‘about-to-end’ year 2014 brought in some sigh of relief for all. There were many political changes that led to the amendments into otherwise hard and stringent policies. Apart from this, the sudden growth of Tier 2 cities and progressive evolution of the understated metropolitan cities. Here are some of the developments that were visible in the gone-by quarters:

Visible Signs of the Real Estate Success

Talking about the recognition, the real estate sector of India is highly acclaimed on a global platform and is also the second largest employer after agriculture. The sector is flourishing and is expected to grow at a steep rate of 30% over the next decade. Let’s have a look at some of the positivity that actually improved and beautified the cracked face of the sector.

1. Foreign Capital Inflows

The capital coming in directly into the Indian realty sector from the foreign land is no more than a boon for both buyers as well as the realtors. The industry analysts predicted that there will be a surge of 35% in the number of enquiries with property dealers. In the race to win, the foreign investment is likely to route towards Bengaluru. The dynamic city will be followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

After a long wait and a series of predictions made by industry leaders, the government has finally eased up the FDI policy rule. This has not only turned the dreams of realtors come true but has also widened the path for other foreign companies to come in and contribute in the construction industry. The researches done on the same proved few points that associates with both, builders and buyers:

1. Benefit for Builders

Foreign capital is huge in terms of value and amount. According to industry experts, the new eased up foreign capital will help more and more money to enter the Indian realty market and help the builders get the required huge first down payment for starting a project. Moreover, the builders can think about planning high-end homes and lavish commercial zone now as the capital inflows will be abundant.

2. The Surprise Benefit For Customers

The eased up FDI policy will reduce the cost of funds for the realtors and thus will lead to lower prices for the end consumers. Apart from this, the easing of the FDI policy will pave path for cheaper capital for smaller projects, resulting into improved quality and delivery of low cost, affordable housing projects.

3. Other Advantages

Apart from the above mentioned important aspects of real estate arena, there are other advantages that will be introduced into the market watch. Here’s a snapshot:

• The eased FDI policy will affect the projects that will be slotted or turned out be joint ventures. The newer clauses will ensure overall higher development and activity levels in the Indian real estate sector. Apart from this, there will be visible reductionin delaying of project completion and there will be improvement in project management jobs. This will translate into reduced pricing and better quality standards for the customer.
• Another benefit visible here is the reduction of the minimum built-up area required to attract FDI. The area has gone down from 50,000 sq. meters to 20,000 sq. meters. Another factor that has seen decrement is the capital requirement that has drooped down to $5 million from $10 million. This ultimately makes investing in the Indian real estate and construction sector extremely lucrative for foreign investors
• Industry expertsare of the view that the exemption of projects which pledges a whopping 30 percent of their total cost to affordable housing is a measure that will give the much required boost to the affordable and mid-income segments

Here’s an illustration of the study done over a period of time:

Source: (India Brand Equity Foundation)

2. Union Budget 2014-15 for India Real Estate

This time the Union Budget 2014-15 has brought in the much-needed relief for the Indian realty sector that will not only bring in positivity for the domain but will also help investments, extremely hassle-free. Here’s what Union Budget had this time for the sector:

• India’s Finance Minister declared that autonomous organization, Real Estate Investment Trusts (REITs) is expected to enter the India’s real estate arena very soon. With this, the internationally acclaimed organization would get a status of being tax pass-through. The Infrastructure Investment Trusts would get tax benefits as well.
• It will help in easingliquidity requirement for the builders, which in turn will pave the way to raise easy capital and also offer access to retail investors. All these entities will be benefitted from regular income and appreciation benefits from real estate
• A huge amount of about Rs 4,000 crore has been apportioned for low-cost housing and another whopping amount of Rs 50,000 crore has been allocated for urban housing. Another interesting clause added to the fact that an Infrastructure Investment Trust will also be developedfor giving a good boost to the Indian realty sector.
• In order to lessen the burden on the head of given bigger cities, Rs 7,060 crore has been kept aside for the development of 100 smart cities
• Housing loan rebate on self-occupied property has been given a surge from Rs. 150,000 to Rs. 200,000. An increase in disposable income in the hand of the buyer will intern give rise to the spending power and thus boost domestic investment.The positive surge will promote home ownership and give the much needed thrust to the housing sector and other related industries like steel, cement, brick wood and glass.

3. A Positive Outlook for Commercial Zone

Much has been done for the residential sector and the builders who are focusing on the same. However, the builders eyeing the commercial sector and business people foreseeing capturing the space can now have a happy time. There is a lot of positivity induced and here’s a snapshot of the same:

• Cities like Bengaluru, Mumbai and Chennai will see a sudden surge in the stature of their residential market. Amongst the lot, Chennai is the one that will witness the maximum real estate activity. Owing to a high migration rate, stationing of flats in Chennai and other metropolitan cities will witness a positive boost.
• Another globally acclaimed organization Goldman Sachs has planned to invest a whopping Rs 1,200 crore (US$ 194.1 million) to build a new campus in Bengaluru that will be accommodatinga good 9,000 people. The new campus is being developed in collaboration with Kalyani Developers on the Sarjapur Outer Ring Road, Bengaluru.
• The much acclaimed tie-up between Assotech Realty and Lemon Tree Hotels to will enable effective management and operation of its serviced residences. The first project, 210 apartments under the branding of Sandal Suites, will be launched in Noida in 2015. The companies will launch 8-10 similar projects in a phased manner over the next seven years with an investment of Rs 800-900 crore (US$ 129.37-145.57 million) approximately.
• Snapdeal has partnered with Tata Value Homes to sell the latter’s ready-to-move apartments on its e-commerce platform. This will be the first time that an e-commerce company will be joining hands with a real estate venture.
• Another surprise element is going to be Blackstone Group LP that will be soon to become the largest owner of commercial office real estate in India after a three-year acquisition drive. The amount incurred is expected to be about US$ 900 million to buy prime assets.

With all the positivity and goodness heard and declared, the life of a common man as well as builders will definitely be affected. The year 2014 is about to end and the New Year is definitely going to be a boon for the Indian realty market. Here are some of the anticipations that can turn into facts, may be in the upcoming year:

The Growth Boosters

Here are some of the expected things that will surely happen owing to new policies and reforms held in the ‘soon-to-end’ year:

1. Rise in the Commissioning of Affordable Housing

Owing to high FDI inflow and high migration rate witnessed by metropolitan as well as connected cities, realtors will soon be entering into full-fledged into affordable housing section. The apartments constructed within the scope of projects will be intact with all the necessary amenities and offered at a very good price.

2. Increased Market Size

The Indian real estate market size is expected to reach a good US$ 180 billion by 2020. The housing sector itself contributes to about 5-6 per cent to the country’s gross domestic product (GDP). Domains such as Retail, hospitality and commercial real estate are also mushrooming at a significant rate, which will be providing the much-needed infrastructure for India’s growing needs.

3. Surging Foreign Tourist Arrivals (FTA)

As the foreign tourist arrivals (FTA) surges every year, there will be a subsequent demand for real estate in the tourism and hospitality sector as well. Moreover, with the entry of major private players in the education sector, major cities such as Hyderabad, Bengaluru, Mumbai, Delhi, Pune, Chennai and Kolkata are likely to account for 70 per cent of total demand for real estate in the education arena. Apart from this, the demand for better healthcare facilities is also expected to provide a thrust to the construction sector in the country.

4.Positivity Expected Owing to Government Initiatives

There are government initiatives that will definitely throw a positive light on the Indian real estate market. Here are some of the government initiatives that are read\y to illuminate the year 2015:

• The Securities and Exchange Board of India (SEBI) has publicized regulations that will govern (REITs) and infrastructure investment trusts (InvITs), respectively. This action will enable easier access to funds for developers who are facing cash crunch. This will also be beneficial for creating a new investment avenue for institutions and high net worth individuals, and finally ordinary investors.
• The Telangana Real Estate Developers’ Association (Treda) plans to commence the Fifth Treda Property Show 2014 at Hitex Centre, Hyderabad. The show will be open to a mixed population. This will include prospective property purchasers, investors, and architects.
• The State Government of Kerala has planned to make the process of safeguarding permits from local bodies for construction. This will make sure that a more standardized procedure is there and there is more transparency, and less corruption and bribery.

Conclusion

Indian realty sector is one of the most important industrial sectors in the country. Be it employment, activities or the contribution towards the GDP, the real estate sector in India gives away a good part to the government as well as the individual housing as well as the commercial sector. The new government as well as the relaxed policies pertaining to foreign investment or the entire construction industry will definitely be able to pull in more investors and buyers too will have a good range of options to choose from.