As the real estate market continues to evolve, experts are examining the factors that contribute to its growth and stability. In this analysis, we explore the current situation and offer insights into the potential trajectory of the real estate market.
Structural Reforms for Sustainable Growth
Researchers emphasize the importance of structural real estate reforms to enhance the credibility of land use planning and implementation. These reforms are anticipated to foster competition within the industry, ultimately leading to more affordable housing. The focus should be on not only providing subsidies but also improving the fundamental structure of the sector. Strengthening the implementation of existing reforms, such as the Real Estate (Regulation and Development) Act, 2016, and digitizing land records, is crucial for transparency.
Income Factors in Property Investment
Before diving into property investment, it’s essential to consider income factors. Experts suggest that EMI should not exceed 40% of take-home salary. Additionally, maintaining a robust emergency fund, equivalent to 12-18 months of household expenses, is advised for financial security.
Determinants of Housing Price Rise
Several factors contribute to higher house prices in any nation. These include expensive land, easy credit availability, slow construction leading to increased bidding, limited housing supply, shadow economy practices, lack of land use planning, and the role of credible developers. Road infrastructure, logistics development, and macroeconomic health, as indicated by GDP growth, also play pivotal roles.
Current Price Situation and Market Movements
Contrary to past trends, the current real estate scenario does not follow previous data patterns. The market is thriving even during election times, with the BJP in power since 2014. Reforms such as GST, demonetization, RERA, and digital initiatives initially impacted the market negatively, but since 2019, it has experienced significant revival, overcoming the challenges posed by the COVID-19 pandemic.
Government Intervention and Market Conditions
Governments play a crucial role in managing market conditions. By improving liquidity, policy liberalization, providing subsidies, offering income tax exemptions, and tightening regulations like the Benami Transactions Act, authorities influence market dynamics. The government’s access to comprehensive property and transaction data through PAN numbers allows for effective control and sector-wise development prioritization.
Expert Advice for Investors
For investors, caution is advised. Those with complete payment capabilities can take calculated risks, but short-term investors should exercise restraint due to increased risk factors. It is recommended to avoid unapproved pre-launch projects and opt for those approved by the Real Estate (Regulation and Development) Act from trusted builders. Projects with a high investor concentration may experience price fluctuations due to increased supply, and seeking advice from knowledgeable individuals is encouraged.
In conclusion, the real estate market’s future trajectory is closely tied to macroeconomic health, government interventions, and structural reforms. Investors are urged to tread carefully, keeping a vigilant eye on market dynamics and seeking guidance from experienced sources.
(By Pradeep Mishra, Founder, Homents Pvt Ltd. Views are personal)