May 14, 2020Investments

Is Real Estate a Good Investment

by Godrej Properties Limited



Today, real estate is one of the most sought after business sectors of the world. It plays a critical role in representing a country’s national economic health and other parameters such as the GDP. In India, the real estate sector is the second largest contributor to employment generation, after agriculture.

Current real estate scenario in India

The real estate sector in India has grown in importance since the liberalization of the economy. The emergence of the middle class, nuclear families, suburbanization, rising housing needs and loans are the fundamental factors that supplement residential and commercial real estate growth.     

Indian household saving rates have increased due to disposable income. The right way to leverage these savings is to invest them in a commodity that guarantees wealth creation in the future.

Government Policies in India

In the light of the changing economy, many government initiatives have come into play such as NBFC's, PMAY, National Urban Housing Fund, that help people with their housing needs. 

The Pradhan Mantri Awas Yojana is an initiative by the Government of India that promises affordable housing solutions by March 2022. With all these new macro policies coming in, affordable housing has become an achievable goal which means more and more people are looking for houses to buy.

Foreign Direct Investment in India 

The importance of Foreign Direct Investment for developing nations cannot be undermined. It brings in an inflow of resources, technological advancement and drives economic growth to a higher trajectory. The Government of India has recognized the need for FDI in India and has liberalized it for the real estate sector, allowing an investment of up to 100% for certain developmental projects. These sectors include housing, townships, new construction projects and built-up infrastructure. 

Private Equity and Venture Capital investments in the real estate have amounted up to 1.47 billion US dollars between January and March 2019.

This is great for buyers as there is increased transparency and due diligence standards are met.

Rising Demand

Demographics such as population and urbanization have played an important part in the rising demand for residential, commercial and retail real estate. 

According to a recent report, India is leading the four fast-growing countries within the real estate sector followed by Brazil, Russia and China with a compound annual growth rate (CAGR) of 5.2% in the 2014-2018 period. 

This indicates that it is currently a good time to buy property since the development of new, affordable properties is on the rise. 

Advantages of investing in real estate in India

1. Tax exemptions in real estate in India are one of the best ways to attain wealth. It makes it easier to reduce tax liabilities. Listed below are some of the tax benefits one can enjoy

  • Section 24 - this section, one can claim exemptions on the interest paid on home loans.
  • Section 80 C - section 80C, one can claim tax benefits on repayment of the principal amount.
  • Depreciation - estate protects your wealth as you can write off part of the value of the asset, thus reducing your tax burden.

2. Appreciating Asset

  • the long run, the value of real estate assets are predicted to be on the rise and will remain to be high yielding. A part of this is because India is rapidly globalizing, thereby creating more alliances and opportunities for people to live in the country. 

3. Good Long Term Investment

  • estate investment is deemed to be a safe investment option since it is not just an asset for the future, but also a usable commodity in the present. It has been and continues to be a good long term investment as compared to stocks and derivatives in terms of the steadiness.

Verdict – To Invest or Not to Invest in Real Estate in India 

India in line to become the 2nd largest economy in the world in 2030, taking over the U.S., your real estate investment will be not only safe but also rewarding. The advantages or benefits of real estate investment in India are plenty. With exemptions on taxes, the role of the government policies and FDI, the real estate market is moving towards being more affordable. 

A good amount of due diligence, market research and guidance can go a long way when it comes to investing in real estate. Apart from a great wealth-building strategy, real estate also provides a buyer with security. Growing one block at a time, the real estate industry is expected to increase at a compound annual growth rate of 11%. With this kind of growth, real estate in India is an attractive market to invest in.

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