The Indian economy is facing a lot of turbulence, and 2013 saw many twists for Indian real estate market. We bring to you an overview of existing situation of this industry, probability of profits, risks, tips on bettering returns and alternate investment options.
Current Economic Scenario
In 2013, the RBI and the Government were unable to meet the projected 8% growth in GDP. The next few months would be crucial in determining financial conditions across various sectors. Increasing inflation has crossed previous statistics, and the rupee is at a new low. With depreciation in economy, real estate investment appears to be in soup. The 2014 may not be feasible for many, yet fruitful for some considering pros and cons of Indian property profitability the coming year.
How Viable is Real Estate Investment in 2014?
It is a common belief that property pricing increases with time. Hence, putting money on land does give you returns. However, have you wondered how slow or fast the returns are? Alternatively, how credible are the issuing rates according to economic condition? Should not there be a reality check rather than sticking on to belief, when Inflation has hit us very bad? Spending wisely has become much more important. For short-term profitability in 2014, expending on rentals, retail outlets and commercial avenues will provide variable returns.
Those looking for long-term return plans can purchase land, and perhaps utilize it for further profit generation, like launching secondary business on the same. However, if you are thinking of utilizing land for business, make sure you are well aware of land capping laws. Some sellers can try to pass on an agriculture land as commercial or residential purpose. So, update yourselves well, acquaint with land laws in the particular area before taking final step.
Factors Affecting Indian Real Estate
- Interest Rates on Loans: Given high inflation, the bank lending rates have not reduces, leading to cascading fall in purchasing power of people. Probably the base rate on borrowing can be reduced, so that more people can apply for loan.
- Pricing of Raw Materials: Construction costs have touched a high, making it difficult for people to expend on land. Price of bricks, cement, iron, and other raw materials required for basic construction is increasing along with property rates, this creating a wider gap in economy.
- Lack of Flexibility: As much as capping particular areas for industrial, residential, retail, commercial use etc. is fair, it also restricts a person’s choice, when it comes to expanding the mode of future profits. Hence, few rules restricting conversion of property into other investments should be reconsidered, avoiding possible consequence of exploitation.
- Incidence of Fraud: Recently, real estate fraud rates have seen a rise. Hence, the loss of trust has resulted in ebbing of income in this sector. However, this is a needle in haystack, considering other possible factors responsible for downfall of real estate investment. It is a big blow, as the money lost here sometimes is a lot more than few other investment options.
Suggestions on Restructuring Budget and Laws
- Engaging Multiple Verticals: Along with real estate, other related industries like banking, construction, interior design etc can be involved, providing fulfilling packages to investors. Controlling interest rates, offers on certain purchases, and additional options on expanding infrastructure beyond what already exists, can be implemented.
- Faster Approvals: The time that goes in getting approvals on loans, construction, obtaining, registering land etc. can be cut short with firmer laws, amalgamating into faster closing procedure. This will save time, expense for those investing in real estate.
- Developing Remote Areas: With existing Government subsidiaries and efforts in renovating, using remote areas, Indian real estate has made a great progress. However, discrepancy of interests is based on profitability, as many a time larger projects at urban areas are given more importance. The difference in quality and infrastructure is easily seen in urban and rural area. A balanced out plan can erase concentration of wealth among rich masses.
- Digitalizing Land Ownership Records: Even after modernization and technological development, land ownership records are still registered on papers. Loss of property documents engages a lengthy process on replicating originals, proving ownership title and other hassles. Steps towards digitalizing such records can reduce these unnecessary issues.
Alternate Investment Options
- Gold, Precious Metals: Prices of precious metals like silver, gold etc are susceptible to fluctuations. However, they still hold promises of good returns. With gold prices rising more than ever, with subtle ups and downs, it is a great asset for future profits.
- Government bonds, Mutual Funds, Life Insurance: Keeping in mind current interest rates and trend of long-term speculation on various commodities, trusting Government bonds and fixed deposits can nurture good growth in your financial asset. Similarly, life, home, commodity insurance can serve two goals at same time of protection and profits.
- Hospitality and Tourism Industry: People these days find ways to improve their lifestyle. You can regard hospitality industry as a never-ending possibility of earnings. Be it a small stall, or average to lavish hotels, food, lodging and entertainment are necessary for everyone. Tourism industry is also booming, as many people choose to travel and spend quality time with each other. Hence, when inevitability of finance is vital, such options can be productive in 2014.
- Private Models of Infrastructure: You can help build country’s infrastructure and earn profits simultaneously. Privatization of several infrastructure areas like healthcare, aerospace, iron and steel industry, technology driven services are booming options for investment. Though private models are riskier than Government institutions, some reliable infrastructure models do exist. However, be aware of market risks to avoid disappointments.
As 2014 is just around the corner, investment options have become wider than just real estate. Knowing current economy status, and inflation, we hope that property as an asset will show much more positive results, despite the cons, and the pros would emerge in spotlight. If you are opting for real estate in hope of profits, formulate plans according to short or long-term benefits suited to your financial condition.
Writer is an idiot who has no idea about the RE market
Reason why you think that? It’d help us improve the article as well as the blog!
Can you guys get in touch with me, we might have something to discuss.
Article lacks detail… lots of it.
There is no regulatory body in India to fix/control the price of land. Pricing model is speculative. Why are the governments and banks not doing anything about it?… (The point here is pricing is speculative, there is no recorded price)
(lets not forget the fact that, there is an on-going debate for decades to bringing bribe money stashed in Foreign banks. There was one sector which can absorb that much amount of cash)
In 2005 FDI were allowed into to retail ( pure coincidence), it was also the time IT, ITes was growing at a rapid pace. Growth story of each city is different. Cities like Pune, Bangalore, etc grew rapidly coz of IT, ITes. The question is … Now that IT is almost saturated, What factor will drive real estate crazily in these cities? On what basis will you bet on Real estate?
Amount of unsold inventory, considering the fact that the builder would have taken loan to build the area, plus it’s an election year ie. The anonymous people who have pumped their cash into this sector need this now and would be pumping it out now (That’s just an assumption). Banks would put pressure on Non performing Assets. 2013 was not good year for real estate, 2014 doesn’t seem good either, don’t fall for builders who try to sell houses at exorbitant prices. There are lot of houses, but not affordable houses. (There is a math behind this)
Each section could have had more details
Interest Rate on Loans:
Current interest rate. Fixed and Floating interest rate. Which would work out best on a long term.
Which banks are best bet for Loans and Why?
I don’t want to proof read whatever is written, but my friend the point is… As long as it is someone else money anyone can give advice.