Article Credit: Times of India
The Indian real estate market has proven its mantle by showing resilience in the face of pandemic induced exigencies over the course of almost two years. Post-COVID, the realty arena kept a steady course in terms of sectoral business. As per ICRA estimates, Indian firms are expected to raise close to Rs. 3.5 trillion (US$ 48 billion) through infrastructure and real estate investment trusts in 2022, as compared to raising worth US$ 29 billion to date. The Indian real estate market is segmented by property type residential, office, retail, hospitality, and industrial, and each has a different market value depending on their location; cities like Delhi-NCR, Bengaluru, Mumbai, Pune, Chennai, and Hyderabad are among the most high-grossing realty markets, while cities like Jaipur, Ahmedabad and Chandigarh are making their way up in this department.
The positive sentiments prevailing in the residential real estate market are soaring high for the year ahead. The housing sector is set to experience more than six percent capital value growth at least in 2022. Various factors such as reduction in premium charges and stamp duty will contribute significantly to the sector’s growth graph, especially in the mid-income housing sector. Developments, real estate investment is one of the most rapidly growing types of investments because funds invested in real estate are spread across multiple sectors. Stakeholders across the industry welcomed Rs 48,000 crore as the allocation for PMAY and the identification of nearly 80 lakh households or the affordable housing scheme mentioned by the fin-min in Central Budget 2022-22. This year also, favorable policies are expected which will encourage more projects and following investments.
Talking about investments in the Indian real estate sector in FY-2023, the opportunities are endless. Multiple avenues for lucrative capital gains make this a great investment option for people. Here are four key steps people must take to prepare for investing in the realty market:
Estimate Affordability:
The pre-requisite for acquiring any property is to critically assess affordability. The principles of which are very basic and require thorough budgeting to see if one has the monetary capacity of buying a said project. Factors such as mortgage payment, downpayment requirements, said property’s estimated rental income, price-to-income ratio, price-to-rent ratio, capitalization rate, and the bottom line must be taken into consideration. In fact, mid-income housing options are constantly on the growth across cities.
Set property selection criteria:
To set and select the criteria for property selection one must be sure of their investment motives while having a list of features in mind about the type of project they will consider. Construction quality, contractor enjoying reputation, location, and the evolution of the market prices are among the most common criteria. Another set of criteria selection is the type of real estate category a said property falls under – it can either be a commercial project or a residential project. There is always new supply in this field, along with new launches meeting the demands at a rapidly growing rate.
Evaluate Expected ROI:
Return on investment (ROI) is a measurement of how much money, or profit, you have earned on investment as a percentage of its total cost. It is calculated by comparing the amount you have invested in the property, including the initial purchase price plus any further costs, to its current value. Two common ways of calculating the ROI on a real estate investment are the cost method and the out-of-pocket method.
The ‘Cost Method’ is calculated by dividing the equity of the home by the property’s costs also known as a ‘cap-rate calculation’ which is usually used for cash transactions.
The ‘Out-of-pocket Method’ is preferred by many real estate investors because it results in a higher ROI. It takes the current equity of the home divided by the current market value.
Aside from the investment, there are many allied industries of real estate. Investing in these can also lead to higher returns on your property, along with value appreciation. Industries such as solar power can aid in property appreciation. Investing in industries such as concrete and paint can also lead to increased returns.
Background Check & Due Diligence:
Do a thorough investigation about the builder and check if they have the necessary approvals from the local authorities. Research the laws applicable in the area where you want to buy a property. Do not forget to learn about taxation policies. Check if the property or the project has been registered with RERA. Make sure to verify all the documentation. If it is a ready-to-move-in (RTMI) project, check if the builder has Commencement Certificate (CC) and Occupation
Certificate (OC) in place.
After a meticulous runt through of the steps mentioned above is done, a real estate investor can consider themselves in a safe space with a higher propensity to gauge sizable capital gains out of their investment. Realty investors will witness a move away from fragmentation which is observed rampantly in real estate currently and conscious effort by key stakeholders toward systemization and unification. This will ensure that listed and reputed developers will increase their equity and strengthen their position in the market. The desire for bigger homes, an influx of more investors including NRI and OCI, as well as a stable industry outlook make 2023 the best time for investing in real estate, and by taking cautious steps, investors can make the most of it.
