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Year Of Optimism And Expectation
Demand is expected to improve significantly in the next 24 months — making it difficult for the prevailing supply to match demand, which will lead to a good appreciation in properties from credible developers in cities with good economic activity
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I remember my grandfather’s advice to invest in a home as soon as I could for a secure future and I think, this holds true for most of us. Now, when I look back, those who chose to go with this advice know how it helped their financial status and created wealth for them while the rest are still living in the era of “what if” and “should have”.
The year gone by was indeed a landmark year in the history of real estate, despite what many ‘experts’ may say. Emergence of game-changing policies like demonetisation, the Goods and Services Tax (GST) and the Real Estate (Regulation and Development) Act (RERA), have certainly paved the way for a sustainable and long-term growth of the sector, which is also the second largest contributor to employment in India after agriculture.
Development and growth of real estate in general and housing in particular, is strongly linked to the growth of the economy. In fact, China’s economy grew exponentially due to the housing boom, in which the realty sector grew ten times in the period between 2000 and 2015, making it the world’s second largest economy. The growth of real estate has direct implications on not just government revenues and the gross domestic product (GDP), but also in facilitating a rule-abiding, prosperous and civilised society.
Progressive and developed economies like those of the US and the UK are similar examples. Thus, it is evident that if the Indian economy has to grow, the real-estate sector has to grow in parallel, else, soon we will see the repercussions on the economy.
Fortunately, our Prime Minister is well aware of the issues and the potential of this sector and has introduced critical reforms to augment growth. With demonetisation, a lot of unaccounted cash is already wiped out and pulled back into banks — resulting in banks levying lower interest rates on housing loans. And then RERA, which will facilitate a transparent ecosystem, boosting the trust between the developer and the consumer.
Furthermore, GST and newer investment instruments such as REITs have encouraged funds and institutions to invest in the sector. All these initiatives have set the stage for the sector’s robust growth, but alas, few ‘experts’ are propagating a contradictory theory, leaving the home-buyer and investor confused. The debate on whether real estate housing prices will drop has resurfaced, but those who make this forecast should realise that whenever real estate prices have fallen, consumer confidence has collapsed and economic growth has also tanked.
This trend has been repeatedly seen in all major economies including those of the USA and the UK, as well as in India (during 1997-2000 for instance). Over 75 per cent of the wealth of our middle class has been created by buying homes at the right time and enjoying great dividends of value growth, stability and an upgraded living environment.
Even today, housing prices in India are amongst the lowest in the G-20 countries and in all likelihood, will keep moving up as the economy grows. There is already a documented shortage of 20 million housing units in India.
With our young demographic, economic growth, lower interest rates and transparent business practices, demand is expected to improve significantly in the next 24 months — making it difficult for the prevailing supply to match demand, which will lead to a good appreciation in properties from credible developers in cities with good economic activity.
I would say that as a consumer, investor or an organised, responsible developer, it is a good time to be in real estate and once the dust settles, the sector will race ahead towards a new phase of growth.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.