Outlook 2021: Will Indian Real Estate Investment be a smart move in 2021?
The real estate sector is one of the largest and important sectors in the Indian economy that has seen a strong period of growth with rise in demand over the years. Its progress is one of the fastest in the country and has been contributing greatly towards the economy. Nevertheless, the realty sector has also been impacted by the Covid-19 pandemic. This industry essentially requires person-to-person interaction and intensive labour demand for its operations. Therefore, the entire industry operations came to a sudden halt with the initiation of the lockdown in India.
The beginning of 2021 has brought with it several new prospects; with the vaccination procedure already in place and policy support from the government, things have started to look up for the realty sector. Let’s take a look at the 2021 outlook for real estate in India.
Real Estate Sector Prospects for 2021
The series of uncertainties globally due to the Covid-19 pandemic has left many people doubtful about making any important investment decisions, especially in the real estate sector. However, real estate can pay-off as per the current market conditions since it is making a speedier recovery compared to the other sectors. Here are different ways in which the sector is picking up pace post the 2020 economic slump.
Sturdy Demand
The demand for real estate has been revived post the lockdown in India. The pandemic has brought about significant changes in the sector, but more importantly, it has changed the consumer’s des towards investing. As a result, more people are inclining towards investing in properties that fit their new evolving standards of hygiene. People are now looking for residence complexes with sufficient amenities to support them during times like the lockdown and better hygiene facilities. Moreover, people are looking for residential properties with in-house office space as work from home is gradually becoming the norm everywhere. Therefore people’people’s for housing facilities with integrated amenities such as cycling tracks, gyms, wellness centers, pharmacies, and convenience stores is rising.Â
There is also a robust demand for affordable housing, which has become the most preferred segment due to developers’ amenities at reasonable prices. This segment of affordable housing is also gaining support from the government.
Due to the reverse migration of the workforce from metropolitan cities to Tier-2 and Tier-3 cities because of the pandemic, the industry notices an increase in demand for real estate in these Tier-2 and Tier-3 cities.
Government Policy Support
With the announcement of the 2021 budget, many government policies regarding the real estate market have been on the highlights. Under affordable housing schemes, the government has provided an additional deduction of interest of Rs. 1.5 Lakh for loans taken to purchase a house. Another favorable policy has been providing a tax exemption for affordable rental housing projects making rental houses more accessible to migrants.
Real Estate Investment Trusts (REITs) have been exempted from Tax Deducted at Source or TDS. Therefore now the tax is only deducted after the payment of dividends to the shareholders.Â
In November 2020, Finance Minister Nirmala Sitharaman announced the Atma Nirbhar Bharat 3.0 package, which included income tax relief measures for real estate developers and homebuyers for primary purchase/sale of residential units worth up to Rs. 2 crores. The injection of funds to support infrastructure development will also aid the recovery of the realty sector.
Reduction in stamp duties reduces the buyer’s burden as they don’t hdon’to incur extra costs while purchasing real estate. According to a study published in December by Knight Frank India, the Maharashtra governmgovernment’scent reduction in stamp duty resulted in the registration of 18,854 residential properties in Mumbai. Similarly, many other states, including Uttar Pradesh, Karnataka are reducing stamp duty to boost demand in the real estate sector. This is gradually proving to support the revival of the sector as more and more people are making use of the cheap rates and reduced stamp duties.
Technological Progress in the Sector
The real estate sector in India relied on person-to-person interaction before the lockdown. This involved interacting with various intermediaries through the process, on-site tours, and interactions between the buyers and the sellers. But post the lockdown, all the operations were forced to be conducted over digital platforms. This has developed the sector as real estate is more accessible now to people online. The entire transaction process has also been simplified, and there is no need for intermediaries to purchase real estate. The technological advances and the switch to digital platforms have provided ease in conducting business. Therefore, people can now buy properties from the comfort of their homes.
Greater FDI
The favorable government policies and the depreciated value of the Indian rupee have attracted many foreign investments, especially from NRIs.
The onset of the pandemic has prompted many NRIs to invest back home. The expected large inflow of NRI investment is also influenced by the depreciated value of the Indian rupee and low property rates. According to a study by 360 Realtors, $13.1 billion in NRI capital is projected to flow into the Indian housing market in FY 21, up 5% year on year. The adoption of technological advances in the realty sector has provided more transparency and sophistication, making it easier for NRIs to monitor their properties online while living abroad.
Despite the short-term disruptions caused due to the pandemic and various economic factors, the real estate sector is set to make a significant recovery aided by the government policies and the vested interests of Indian citizens looking for secure investment options in challenging times. Therefore, this sector is on its road to recovery, and this could ensure a steady long-term investment option for various investors.
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Frequently Asked Questions on Indian Real Estate Investment in 2021:
In simple terms, real estate investing refers to purchasing property to generate income. This property investment can be in the form of land, building, and infrastructure, etc. Real estate investment is one of the safest forms of investment as it is immune to inflation and shows steady forms of recovery in the long term.
Investors can consider two options while investing in real estate. First, they can invest in real estate property that they can rent; this would allow them to earn monthly rental income. Second, they can opt for fractional ownership through REITs that allow them to invest whatever amount they desire and earn dividends from property appreciation. Assetmonk is a platform that guides investors through their real estate investment journey in India. With its well-curated daily updates and product line, Assetmonk can help investors analyze their investment options in India’s real estate market.
Investing in real estate has proven to be profitable in recent years due to its ability to endure and sail through the storm of declining markets. This qualifies it as the best investment choice in the current market in India. However, the short-term disruptions caused by the pandemic and other economic factors, the real estate sector is poised to make a substantial recovery, helped by government policies and the vested interests of Indian people seeking safe investment options during difficult times.
As we have noticed since the beginning of 2021, the real estate market is picking up pace as more home buyers are willing to invest in the market. After the long period of lockdown that led to the labor workforce’s reverse immigration, the on-site construction activities are resuming as the workforce is getting back. The pandemic’s evolving consumer attitude is creating a robust demand for safe, low cost and ready-to-move-in properties. Therefore the property market is very well set to recover in 2021.
The annual price growth rate in many cities throughout India has been around 0-7% over the last year, indicating a muted price growth because of the Covid-19 pandemic. The lockdown in India halted all major operations of the real estate sector for some time. Still, the attractive discounts by developers and overall low property prices is boosting the demand. The prevailing prices in various cities have significantly fallen and might continue to be like this until the market picks up.
