The last 8-10 months have shown a promising uptake in the investments in physical assets. The first reason for this should be credited to the demonetization scheme introduced by the government.
Reports state that out of the Rs 300 lakh crore of investments that have been made by the Indians, Rs 170 lakh crore of it are invested in financial assets such as fixed deposits, mutual funds and stocks. And the remainder Rs 130 lakh crore are invested in the physical assets. Out of this, Rs 55 lakh crore have been invested in the real estate industry. And the rest of it has been chalked up as investment in gold. The aforementioned investment figures have been accumulated in the last few years, where Indian households have invested in these categories in the past few years. However, the 2008-09 market witnessed the Great Market Crash which lowered the popularity of the financial assets.
Thankfully, the resurgence of interest in financial assets in the years 2015-2017 grew favourably. Real estate transactions have grown to depict the sale of apartments in the top 9 cities to live in India have taken a nosedive. While the interests in financial assets grow, the interests in physical assets have severely dropped from 460,000 units to 310,000 units, to 210,000 units, in FY14, FY15 and FY16-17. Therefore, there has been a severe drop in the interest that physical assets such as real estate usually beckoned. A majority of the real estate purchases made in the reported figures have been undertaken by high-end buyers. Along with the slowdown in the real estate market in the pre-RERA days, this period spelt disaster for the physical assets market.
The last 8-10 months have, however, shown a promising uptake in the investments in physical assets, i.e. real estate. The first reason for this changing of the seasons should be credited to the demonetization scheme introduced by the government. It gave the real estate community the jump-start it needed in order to free the malpractice of laundering black money via real estate purchases. Once the initial end-users started to regain faith in the real estate commodity bids, for not having to go up against competitive-buyers with deep, black pockets, the majority of the community saw a reason to follow suit.
The final coffin in the nail in the uprising against black money in the real estate transaction community came in the form of the Real Estate Regulatory Act (RERA) 2016. The entire cacophony of misleading advertisements, bait-n-switch, project delays, false promises and one-sided clauses was nearly done away with, in one fell swoop. Developers are now forced to consider multiple protective clauses in the agreements, that benefit the buyer.
The GST implementation also simplified the taxation policies that real estate consumers have come to expect. This has allowed both the developers and the buyers to make the most of the scenario. The prices in all major sectors have also remained favourably constant and reasonable, allowing the real estate market to make the most of it. Home purchases have never been more affordable than they are now.
The aforementioned four factors have had a big hand in streamlining the real estate market for Indian buyers. Foreign investment has also been growing in this sector in the last few quarters. This has set up the forthcoming quarters to project a promising forecast, with a lot of liquid currency entering the market. It is to be noted that the developers may want to make the most of the boom and decide to unilaterally increase base prices at that point. So, if you are looking to invest in real estate, now should be a good time!
(By Honey Katiyal, Founder & CEO, Investors Clinic)