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Why Real Estate Is The Best Investment Option Right Now

Even The Venerable “Economist” Thinks So

In September 2023, the Economist, the respected macroeconomic and business publication, focused on Indian real estate market.

The theme was; India was in an amazing sweet spot in the realty market.

India had all the catalysts for smart growth in real estate as an investment. The RERA Act had streamlined real estate activity substantially and put more onus on builders to deliver on promises.

India was a classic case of rapidly growing demand and insufficient supply and that was likely to keep prices elevated. At least, the real estate forecast next 5 years indicated that real estate was the place to be. Harsh Indian weather conditions meant that most old buildings were in urgent need of redevelopment.

Interesting Trends in Indian Housing Market

There are some key trends in the Indian real estate market. For the fiscal year FY23, the real estate residential market stood at Rs. 3.47 trillion (source: IBEF) showing a 36% yoy increase in volumes and 48% increase in value.

Within residential, the surge in demand for premium homes was evident in the registrations in Mumbai, Delhi, and Bengaluru. These are emerging as the best places to invest in real estate. There is a growing preference for low-density homes (villas, gated communities, etc).

At the same time, a survey by Sotheby’s International revealed that nearly 33% of the HNIs and Ultra-HNIs in India were willing to shell out over Rs. 10 crore for a house. The passage of RERA led to a surge in demand for housing in tier-2 cities too, while the government allowing 100% FDI in townships could be a big trigger in coming years.

6 Reasons Why Time To Buy Real Estate Is Now!

Most of us have heard the standard reasons to buy a home – real estate never disappoints; you need a roof of your own; realty is a long term source of security etc.

All that is definitely true, but there are more compelling reasons too.

  1. There is a lot of wealth created in India in the last few years. Equity markets are at all-time highs and index funds have given CAGR of over 19% in last 3 years and 15.3% in last 5 years (Source: Morningstar). Also, gold prices in Indian rupees are at an all-time high and Indian households with 27,000 tonnes of gold, are a lot richer. All this new-found wealth is likely to translate into diversification into real estate. More so considering that, realty market tends to attract money when price trend is up.
  2. The demand-supply situation is rapidly changing. Between 2012 and 2019, most of the real estate developers were deluged with excess supply. That had kept the prices under check. That is changing in the last few years and it looks likely that the inventory would not last long. It is time to invest before the demand-supply equation changes.
  3. Despite repo rate hikes, home loan rates in the range of 9% to 10% are still attractive. The government has contributed by reducing GST on under-construction property from 12% to 5% for regular homes and 8% to 1% for affordable homes. The additional tax benefit for affordable homes is an added push.
  4. Government policy framework has consistently favoured increase in home ownership in India. The passage of RERA, with checks and balances on builders and real estate brokers have made the real estate market safer for Indian investors. The lowered GST rates and the various PMAY schemes are proof that policy will favour home ownership.
  5. There are several tax benefits to home ownership. Interest is exempt from tax up to Rs. 2 lakhs per annum under Section 24. In addition, principal repayment gets tax benefits under Section 80C of the Income Tax Act. Section 54 and Section 54EC offer capital gains benefit on sale of homes by reinvesting in specified assets. There are special incentives for affordable homes.
  6. Finally, there is an emotional content to home ownership. It is the standard urban dream of your own home, and this may be the reason for going ahead with your home investment plans. You can also look at a second home as an investment since the tax benefits of renting out a second home is fairly attractive.

Let us finally focus on how to boost real estate investment productivity.

How To Maximize Your Real Estate ROI

Remember, the ROI of your real estate investment is a sum of total various factors like the price appreciation, rental income if any, the diversification impact on your portfolio, the long term security of owning a home etc.

You can look to investing in a variety of real estate investment options like residential, commercial, structured rental properties, REITs etc. This gives diversification against real estate cycles.

Don’t treat real estate portfolio like equities or mutual funds. Realty may not work over 3-5 years. Ideally look at a 10-15 year perspective.

Like in any investment; do extensive research on the overall property market, cost of funding, policy perspective and property location evaluation. Seek expert opinion. There are several professional firms that will advise you for a fee; apart from your regular real estate agents, property developers and chartered accountants. Above all, getting a good deal in real estate is about how much you can negotiate. You can effectively negotiate with the seller and with the financer for the best possible terms. That is the key!

SBICAP Securities Limited through its division SBI Realty solutions deals in Pre Launch, Under construction, Ready Possession. SBICAP Securities Limited through its division SBI Realty solutions provides a unified platform for exchange of information & facts for buyers, builders & sellers. SBICAP Securities Limited through its division SBI Realty solutions is merely an intermediary for exchange of information to facilitate the transactions between Builder, Developers / Seller and Customer / Buyer and is not and cannot be a party to or control in any manner any transactions/disputes between the Seller and the Buyer. Projects featured on are SBI approved projects only. SBICAP Securities Limited through its division SBI Realty Solutions shall neither be responsible nor liable to mediate or resolve any disputes or disagreements arising between the Buyer & Seller and both Seller and Buyer shall settle all such disputes without involving SBICAP Securities Limited through its division SBI Realty solutions in any manner whatsoever. The Website provides in depth analysis of the Property Market with more than 2400 Under Construction Projects developed, which are currently under development by more than 800 Developers. The website features latest prices, digital pictures of projects in various construction stages. The focus of the website is on Home Buyers looking to buy or upgrade to a New Home or Invest in under construction project or pre-launches by reputed builders.