The market sentiment is improving and the interest rates are at a record low. And with limited inventory available, it is a right time to invest in real estate industry.
Introduced with several reformatory measures such as Real Estate Regulatory Act (RERA), Benami Transactions (Prohibition) Amendment Act, Goods and Service Tax (GST) in the past couple of years, the real estate sector in India looks to be settling in with the change.
This raises a million-dollar question: is this the right time to invest in real estate sector? Probably yes, this is the time to enter the real estate market. Here are some strong reasons why I believe so.
As per the research studies conducted by PropTiger, the number of new project launches in India went down by 43% year-on-year in 2017 and subsequently the sales volumes dropped by 17% across nine major cities in India.
This trend is going to continue, and given the provisions of RERA, the number of new launches will no longer be comparable to the yesteryears. Developers will instead focus on launching a few projects and taking them to the completion stage rather than launch several ones, lag behind in construction and face penal provisions of the Act.
Clearly, the volume of fresh supply in the market is going to be down. Unlike the past when the supply used to exceed demand, there will be a limited inventory available in the market.
At the same time, there will be no stopping to urbanisation and population growth. More people will look for homes within the same market and once demand finds its equilibrium with supply, property prices are going to rise on the back of strong fundamentals.
Interest Rates Are At Record Low Levels
The Reserve Bank of India has slashed its key policy rates by 2%, from 8% to 6%, between January 2015 and October 2017. As per the latest monetary policy review report, the inflation rate is floating in the desirable range of 4-5%.
Given this scenario, it is unlikely that the RBI will bring the interest rates further down from the present levels. Experts believe that in the extreme case, the apex bank may cut key rates by 0.25% during 2018 but there is no possibility of rates going below these levels.
Therefore, the current home loan interest rates are going to be stable in the coming times. At present, banks and financial institutions are offering home loan at 8.3-8.4% per annum and there are several other offers available at your disposal.
Once the supply side gets restricted, this may not be the case in the future. Today, it is a buyers’ market and those willing to take the plunge and enter the market have great options on their way.
Improving Market Sentiment
After the implementation of a pro-consumer act like RERA, the market sentiments are improving gradually. The inflow of funds in the sector is getting smoother. As per the latest industry reports, Private Equity (PE) and debt investments in the real estate sector grew by 12% in 2017 as compared to the preceding year.
The ongoing thrust of the affordable housing by the government is driving more funds towards the sector. In overall, the market sentiments are improving fast.
It is perhaps an opportune time to buy real estate and strike deals that may not be available after some time. So, what could be the excuse for not buying real estate at this point?