The global economy’s opening up has given the real estate industry more prominence, and the increase in employment opportunities and labour mobility has led to a bigger demand for office and residential spaces. Real estate is showing distinct trends in different parts of the world, as it appears to be on the rise at the moment, in industrialized nations like the United States and Canada where it is booming, however, in India the industry has been in a state of stagnation for the past few years and it appears to be on the rise at the moment as per the Real Estate cycle.
Population growth, employment possibilities, income levels, interest rates, and capital access all influence real estate demand. Urbanization, demographic shifts, sustainability, technological advancements, and the altered financial system are all affecting the real estate market, thus leading to questions such as: What exactly is happening in the real estate sector in India? Are there any opportunities available for the investors? The real estate sector will be significantly impacted by these changes, which will result in significant investments growing the real estate asset base. Property values and demand, which are both driven by broader economic situations, determine a company’s profitability.
Future of real estate market in India in 2023:
According to the current situation, the unsold inventory is less than 3 years’ stock. As a result, there will be a shortage in a short period of time, making it the perfect moment to invest in real estate because the supply-demand cycle will soon resume. As high rise buildings and complexes are real estate projects that take between three and five years to construct in India, therefore the stock level that is below the time required to complete brand-new developments is viewed as a highly favorable development for the market.
Real estate as income generator:
Residential, Commercial, and REITs where one can earn a guaranteed return on their assets. In India, rental returns will rise from 4% to 6% at this time, and the future is certain to be promising. If money is invested wisely, the average rate of return in the upcoming years can easily reach 20%. According to the law, the Tenants Eviction Act has already been created, published, and put into effect in the state of Karnataka. The government is currently establishing an authority that will regulate all residential renting processes and minimize risk on the part of property owners.
With the assistance of the Real Estate Regulation Act, real estate investment in India has altered over time, with noticeable changes:
- It now has a regulator.
- It has grown significantly more organised, with more investors participating, including retirement funds, FPI, and private equity funds.
- There is large-scale development occurring, and developers have access to funds at very competitive rates.
- Protecting investors’ interests.
- Through REITs, it is possible to indirectly invest in real estate.
- Through REITs, one may own a portion of real estate.
- Interest rates are quite low.
- Rent yield is increasing.
Industry-related possible outlook:
When one looks up at the real estate cycle in India, it begins when the EMIs at an average salary or at an average price are close to 30-32%. This makes Indian real estate generally out of reach for the average individual. But during the course of its cycle, real estate prices rise by up to 300–400%, which isn’t always in line with the average rate of population growth. Prices rise faster than pay raises do, which causes EMI payments to grow.
The current rental yields in India range from 2% to 4% for residential properties and from 7% to 10% for commercial buildings. One can anticipate a 5% annual growth in rental rates, as rents will increase along with the economy’s recovery owing to a guaranteed yearly income.
- Residential – Better income tax benefits, higher appreciation, and lower rental costs
- Commercial – Lower appreciation but higher rental rates
The only difference between the returns from the two sectors is that the commercial sector will yield larger cash flow every year while the residential sector would yield higher capital returns in the end. Real Estate Investment Trusts (REITs): invest mostly in the office sector, have clear visibility of earnings, are excellent investment vehicles, are simple to buy and sell, and allow for both short-term investment as well as partial ownership. One can also use rental home search engine to search for the rental properties to invest in.
The pandemic has made the problem more severe in the past few years and as a result, there is a large supply of commercial and rental real estate that has not yet been sold out across India. With around 2 lakh unsold units in Mumbai and 3 lakh unsold units in the NCR of Delhi, the unsold inventory peaked out in the year 2018–19. The government came up with various schemes, reduction in taxes and stamp duties and intended to take advantage of the pandemic’s opportunity to get rid of the enormous stocks that were lined up unsold. With the help of these sops, Mumbai sold one lakh units of unsold inventory last year, with very few fresh launches.
Real estate in India – changing trends and opportunities – A must watch – by D B mehta (2022) YouTube. Available at: https://www.youtube.com/watch?v=WdOk5NjsH9c (Accessed: 14 May 2023).
PricewaterhouseCoopers (no date) Emerging trends in real estate®: The global outlook 2023, PwC. Available at: https://www.pwc.com/gx/en/industries/financial-services/real-estate/emerging-trends-real-estate/emerging-trends-real-estate-global-outlook-2023.html (Accessed: 14 May 2023).
PricewaterhouseCoopers (no date a) Emerging trends in real estate® series, PwC. Available at: https://www.pwc.com/gx/en/industries/financial-services/real-estate/emerging-trends-real-estate.html (Accessed: 14 May 2023).