• Demographics and Development…….

Between 1950 and 2005 the global urban population has more than tripled to reach 3.15 billion. While urbanization has considerably slowed down in developed countries, the enveloping world is where cities are growing the most. It accounted for 68% of the urban population in 2000. By 2020, 77% of the global urban population is expected to be in developed countries.

• In India, Urban population has been increased from 20% in 1971 to almost to 34% in 2006 and contribute over 50% to GDP. (Source: www.unhabitat.org)
• Indian Economy currently stands among the world’s 4th largest growing economy in terms of PPP (Purchasing Power Parity).
•  India’s GDP is estimated to be the third largest in the world by 2020.
• India is also considered second most attractive country in world for FDI investments of about US$ 11.14 Billion in 2007 with rise of 36% in terms of rupee and 54 in terms of US dollars. (Source: Economic Budget 2007- 08)
• India performance has been steady over past 3 years with an average Annual growth rate of 8%.
• In recent years, the broad-based growth in service sector has been principal driver of GDP growth.
•  India has a well-developed road and rail network. Large investments are underway in areas of:
•  Highway development
•  Air-connectivity (Domestic & International)
•  Up gradation of ports with their privatization
•  Power sector
  

Why invest in Indian Real Estate Reforms??……….

HIGH DEMAND COMMERCIAL REAL ESTATE

• In India demand for new office space has grown from an estimated 3.9 million sq. ft to 45 million sq. ft in 2006-07.
• The demand for office space is driven by more than 7000 IT and ITES firm, financial service provider and other sectors.
• As Indian IT-ITES industry has absorbed a total of approx. 30 million sq. ft and is estimated to generate a demand of 150 million sq. ft of space by 2010

HIGH RETURN ON RESIDENTIAL REAL ESTATE

• The Residential property market in India constitutes almost 75% of the
  real estate market in terms of value.
•  Low per capita housing stock, rising disposable income coupled with
  easy finance from housing finance company and banks are driving
  demand in this sector.
•  Average house loan borrowers have decreased to 30-35 years from 40-
  45 years a few years ago.
•  Housing sector is growing at 30-35% per annum.
•  The demand for housing is also driven from investor who view it has an attractive investment option as compared to mutual funds and stocks.

RETAIL SECTOR FACILITATING REAL ESTATE GROWTH

•  The Retail industry in India continues to be dominated by individual small format stores with floor space of less than 500 sq. ft.
• Total number of retail outlets is estimated to be around 12-15 million, indicating a retail density of 12-14 outlets per 1000 people, which is one of the highest in the world.
• The contemporary retail sector is reflected by shopping centres and Multiplex-mall contributing large scale investment in real estate.
• The retail sector in India is currently estimated at USD 230 billion.
• But the organized retail activity is 7 billion which is mere 3% of total retail sector and is growing at 25%
• 30% per annum is expected to be worth over USD 30 billion by 2010.

HIGH DEMAND FOR HOSPITALITY REAL ESTATE

• Hospitality industry is in India is growing at an annual rate of 8%.
• The number of foreign tourist arrivals (Major driver) in country was approx. 4.4 million in 2006-2007.
• More than 55% of total demand for hotels in country is generated by foreign leisure tourists and business travellers.
• Service Apartments, Hostels, Wellness space gaining popularity.
• With growth in demand for rooms at five-star hotels at 18% another 65000 – 85000 rooms will be needed till 2010, results in high level of activity in construction of hotels which will fetch more investors in this sector.

SEZ’S – THE EMERGING INVESTMENT OPTION

• The upcoming realty trend in India after multiplexes and mega housing projects are the Special Economic Zones (SEZ).
• Currently only 28 SEZ are operational in country, including those converted from Export processing Zones (EPZ) to SEZ.
• Approx. 189 proposals have been granted approval since SEZ Act,2005 came into force.
• SEZ’s are in various segments such as multi-product, Information technology, Bio- technology, Gems and Jewellery, textiles and technology initiative industries.
• Major Players RELIANCE, ADANI, SUZLON Infrastructure, HINDALCO etc. FDI – INVITING REAL ESTATE INVESTMENTS
• With the opening of the sector for 100% FDI under automatic route, the
• real estate sector is estimated to capture about 18-20% of the total FDI coming to India in 2005-06.
• The FDI in Real Estate is expected to have a favourable multiplier effect on the economy.
• As an indicator, for every rupee spent on construction, an estimated 75- 80% gets added to the GDP.
• The spill-over effect of this initiative can also be witnessed in important sectors like the cement and construction industries, where the key players are expanding capacity to meet the soaring demand.

Real Estate Investment in India is a wise choice………

• Everybody wants to secure their future. There are many options where people tend to invest their money, but if we look at all pros and cons, real estate is by far one of the best investment options presented, giving the option of low risk and high investment. It is all the more attractive for real estate investors in India in the post-Covid-19 climate, with international investors eager to relocate their investment from China to India. People migrate to new cities, more jobs, more influx, and more individuals keen to buy properties. As a result of increased demand, real estate prices will rise. Many arguments prove that real estate investment in India is a good choice.
• Real estate investment can help you get wealthy quickly because property values can rise at exponential rates. When you look at the well to-do, you’ll see that the affluent are usually the ones that inherited a large amount of property. After urbanization, many regular individuals sold their fields and property and became wealthy suddenly.
• For earning individuals, investing in real estate in India might result in significant tax savings. If you take out a home loan, you may be eligible for an IT refund on the annual interest paid, a portion of the principal loan amount, stamp duty and registration fees, and other additional deductions under Section 24, Section 80C, section 80EE, and other similar provisions.
• Previously, real estate investing did not involve the same dangers as bank deposits or stock markets. There used to be a worry of land usurpers occupying the sole property or unauthorized persons falsely selling your property.

Why invest in Real Estate now?………

With the onset of Various waves of coronavirus, one might be thinking that the market is down and investing in real estate now is not a good option. But the case is not actual. The recently reduced cement costs, together with the discounts and rebates associated with Covid-affected markets, can assist one in obtaining property at a lesser rate.

India is urbanizing at a fast pace. Nuclear families and rapid urbanization are likely to take over. The demand for all kinds of real estate sectors is at its peak henceforth. Putting money in the bank is stagnant money. Gold rates may drop and increase and are fluctuating constantly. While businesses have a high risk of failures, real estate sectors are comparatively safer and the best option to invest in currently. India Ratings and Research (Ind-Ra) says, ‘the Indian real estate sector may stage a sharp K-shaped recovery in FY22.’

Real estate in India has comparatively low risk but high returns. Post the covid situation, many international countries are willing to invest and barge in into the Indian economy. Given that it is evident that grabbing the real estate sector and making the best use of it is the best investment. If not now, then when?

The Government of India has also started to actively indulge in the real estate sectors of India. The residential sectors are expected to grow exponentially, with the central government willing to construct 20 million affordable housing in the urban cities by 2022. This increase in residential areas will gradually give rise to the demand for commercial and retail real estate properties and their development. It is to be noted that the stamp duties for property registration have been reduced to half in most of the states in India on the basis of the Indian government’s request.

Road Ahead…….…

The Securities and Exchange Board of India (SEBI) has approved the Real Estate
Investment Trust (REIT) platform, allowing all types of investors to participate in the Indian real estate market. In the following years, it will offer a market potential worth Rs. 1.25 trillion (US$ 19.65 billion) in India. The transition from family-owned to professionally managed firms has been the most noticeable change. To address the increased need to manage various projects across cities, real estate developers invest in centralized methods for sourcing materials, organizing the workforce, and recruiting experienced professionals in project management, architecture, and engineering. Increased transparency is being encouraged by the growing flow of FDI into Indian real estate. Developers have updated their accounting and management systems to meet due diligence criteria to seek investment. With an US$ 8 billion capital injection by FY22, Indian real estate is likely to attract a significant amount of FDI in the next two years.

• Negative Impact on the credit profiles of Real Estate companies.
• Weeding out weaker entities, thereby increasing the relative strength of
  larger companies.
• Liquidity risks remain a key challenge across the board.
• Materially high rates of interest end up refinancing by small players.
• Monetization of stakes by attracting PE would remain a key for managing overall funding and liquidity requirement.
• Liquidity pressure for project execution and general slowdown in property sales.
• Reducing list price for enhancing demand and to avoid risk of liquidity pressure.
• Higher construction cost could also impact margins.
• Large players with an attractive portfolio of ongoing development and an established track record will enjoy access to loan market and also attract capital through PE route.
• Finally, Short-term outlook is Negative