Finance Minister, Nirmala Sitharaman presented the Union Budget 2020-21 on 1st February. Here are the highlights of the allow the important estate sector:
The deductions on affordable housing were allowed on housing loans sanctioned on or before 31st March, 2020. to make sure that more people avail this benefit and to further incentivise the affordable housing, the date of loan sanction has been proposed to be extended by 1 year and a tax holiday is being provided on the profits earned by developers of affordable public housing approved by 31st March, 2020 to spice up the availability of affordable houses within the country
Currently in land transactions, while taxing income from capital gains, business profits and other sources if the consideration value is a smaller amount than circle rate by quite 5%, the difference is counted as income both for the purchaser and seller. so as to attenuate hardship in land transaction and supply relief to the world , it’s been proposed that the limit be increased from 5% to 10% REAL ESTATE MARKET IN 2020
Rs 100 lac crore would be invested on infrastructure over subsequent 5 years across various sectors like housing, basic amenities, energy, healthcare, educational institutes, transportation, logistics and warehousing, irrigation projects, etc.
According to CNBC.com, the year 2019 was a period of the many highs and lows for the Indian land market. the continued NBFC crisis resulted during a liquidity squeeze and therefore the slow pace of recovery in sales. However, on the positive end, the successful launch of India’s first land investment company (REIT) opened new avenues for investments while multiple positive government initiatives provided a way needed relief to the world . As per ANAROCK research, the housing sales value of India’s top 9 listed players touched a whopping Rs 108B within the 2nd and 3rd quarters of 2019, amounting to a 5% growth QoQ. Housing sales in 2019 saw a modest 4-5% annual growth with over 2.58 lac homes sold during the year. New housing launches in 2019 saw 18-20% annual growth and developers hope that sustained efforts of the central government like additional deduction on loan interest, GST rate cut, alternative investment fund for stalled projects and changes to credit guarantee scheme would strengthen the world , especially affordable housing-led growth.
Here, during this blog, we share the outlook of realty investments in India for 2020 and help answer the crucial question of, “Should I invest in land in 2020-21?”
Following are trends for land investors in 2020:
Greater Concentration of Demand
Jobs have an immediate correlation within the growth of the Indian economy and changing demographics. Today’s home seekers, be it for purchasing or renting, don’t mind relocating to new cities if the prospects regarding employment opportunities are engaging. Most jobs tend to be service or office jobs and businesses that provide these jobs need more support services that are most efficiently delivered in big markets. IT & personnel support, office space and healthcare are simpler when they’re concentrated. And nowadays entire cities also are being built using eco-efficient technologies to scale back negative impact on the environment like Jaypee Sports City and lots of others. So, businesses, cluster in markets where these services exist already , which successively concentrates the services even more, making the markets even more attractive. What this suggests for investors is that demand for housing in big markets almost certainly will still grow faster than builders can create more supply which can eventually escalate prices and rents.
Slowing Home Prices
Between now and 2025, India are going to be a part of nations which can account for 72% of the expected construction activity across the planet . this suggests better infrastructure and improved connectivity and thus high standard of living. This also results in bridging the gap between metro cities and their village counterparts. Global Construction research also shows that by 2025 India will have 1.1 crore annual average house completions on a mean . So land is about to develop at a worldwide scale and costs in land also undergo a high and low period. Investors can make invest during slow home prices which wil prudent choices supported their budget and private preferences.
Bigger Gap Between Owning and Renting
The surge in home prices in recent years, especially in many of the large markets, puts a house beyond the reach of more people. this is often excellent news for investors in rental property but also means it’s difficult to only buy a home and rent it out: the amount of individuals who can afford the high rent is little . a far better strategy in these markets is to separate a home into several rental units, albeit that takes time and money. Apartments also are an honest idea, especially because rents will still rise, albeit home prices don’t.
Smaller Risks in Smaller Markets
Investors will want to avoid the credit risks you run at the lower end of the investment price range, physical location is even more important, and you can’t calculate inflation to flesh out your expected return – you want to drive a tough bargain. But the ratio of costs to rents will often be in your favor, your investment won’t cost an arm and a leg – and you almost certainly won’t have much competition. Research shows that fast growing cities will drive high risk high rewards in emerging economies.
The rise in Demand for Emerging Micro-Markets
Micro markets like Bhiwadi in NCR, Halol in Gujarat, Jamshedpur, Jaipur, Jodhpur, Sohna in Gurgaon, Airoli in Navi Mumbai, Pirangut in Pune and Madhapur in Hyderabad witnessed huge demand for residential homes. Real-estate experts predict that 2019 and 2020 are going to be the years of emerging micro-markets, with huge demand for quality residential homes as industry and economic opportunities grow in these micro-markets.
Impacts of the Real-Estate Reforms of 2017
Real estate is one among the main contributors to India’s GDP and has grown to Rs 12,000 crore (US$ 1.72 billion) in 2019. The market saw several progressive policy reforms within the last few years. While it’s true that the majority of those reforms were taken back in 2017, the impacts were seen largely in 2018.
The three major reforms – the introduction of GST, the launch of RERA and therefore the grant of infrastructure status to affordable housing properties – have had a huge and positive impact on the industry. The government’s vision of “Housing for All by 2022,” and therefore the grant of infrastructure status to compact, affordable residential homes saw a rise within the demand for low-cost homes.
The RERA (Real Estate Regulation Act) was introduced in 2016 to bring uniformity within the real-estate market and to guard the interests of buyers from the malpractices of unfair builders. Today, the results of the RERA are often seen – it’s increased transparency in real-estate deals, improved accountability of builders, which successively has led to increased demand from buyers.
The GST was introduced in 2017 with the ideology, “One Nation, One Tax.” While there have been some initial teething troubles, today the impact of GST remains largely positive. GST has made it easy to try to to business within the country, seeing a marked increase in infrastructure developments and other real-estate projects.
These three factors have had a cumulative effect on the real-estate industry in India and drive the increase in demand for real-estate investments.
Increase in Real-Estate Sales and Launches
Post demonetization, real-estate project launches, and sales have grown significantly. One major shift in residential realty trends is that the increase in demand for mid-segment and affordable housing, compared to luxury, high-end properties.
Other factors that drove real-estate sales within the last year include – availability of a good range of flexible payment plans from NBFCs and digital lenders, which allows homebuyers to shop for properties at lower EMI and interest rates, compared to traditional lenders; tax rebates on home loans; CLSS; no floor rise cost; discounts and freebies offered by builders.