Why real estate continues to be a secured investment option in India

By LODHA

Given that real estate is always under scrutiny, it is evident that most people don't understand its value. The common misnomer is to relate real estate to residences. Very few people understand the power and potential of real estate.

For the sake of this article, let us confine ourselves to real estate development in the present and future. The movement focuses on growing and developing SEZs, roadways, business parks, and city expansion. These are the major focal points. Residences and other ancillary projects are natural associations to real estate, so we can assume it is a given. There is a huge impetus in real estate activities, and it is only slated to grow.

Real estate prospects for India

With so much said about real estate, let's give it some perspective.

- The real estate industry is expected to reach the $1 trillion mark by 2030 - that's under a decade. In terms of real estate contributing to the economy of India, experts expect that by 2025 real estate will make up 13% of the country's GDP. In 2020, industrial investments attracted about $5 billion. (Source: IBEF)

- Coming a close second, real estate is among the highest employment generators in the country, lagging just behind the agricultural sector. In terms of direct and indirect employment, the industry supports millions of homes. What's more, several small, medium, and large-sized companies depend on real estate for their existence - all the way from construction consultants, suppliers of raw materials to real estate companies. It goes on to demonstrate real estate's role in nation-building.

- Home sales in eight major cities have been just under 100,000 in the second half of 2020. (Source: IBEF) It is indicative that despite the lockdown, there is still a huge demand and purchasing power among people. We can't ignore the impact of covid on real estate, but these figures indicate that the potential continues to be significant.

What has impacted real estate dynamics

Several factors contribute to shaping real estate preferences and purchases today. The most important among them include:

- PMAY:
Pradhan Mantri Awas Yojana (PMAY) scheme extended by the central government aims to make 20 million affordable homes available to the people by 2022. With work in full swing and close to 11 million homes completed by late 2020, the offering seems very real and beneficial to the economically weaker section as it makes buying home accessible given the lower rate of interest and subsidies.
 
- RERA:
The instrumentation of this Act has ensured an adequate boost to the real estate sector and protected buyers better. Transactions are now more equitable and have improved the overall buying climate in India significantly. With more transparency and accountability woven into real estate promises and purchases, RERA has helped streamline the real estate industry. It is heartening to note that the Real Estate Transparency index of India rose to 34 in India. It is proof of the success of regulations and reform initiatives.

- Urbanisation:
The country is moving rapidly towards greater urbanisation. Real estate growth in these regions has always been concentrated, and this trend is only set to consolidate it further. With close to 75% of the GDP being pumped in from urban areas, this is where all the action is.

- Space demographics:
Several industries like healthcare, eCommerce, logistics and education have shown a need for more space. It indicates the demand we are noticing and the pace at which the real estate industry is about to grow.Industrial parks have emerged as the most preferential propositions. The ability to have dedicated areas for business, with similar brands existing within the vicinity has been a draw for small and large businesses. It has facilitated ease of business and transactions as well. Office spaces have also grown to be more global in their construct, design, and aesthetic. Commercial real estate today is driven by the demand for great quality, design, and space optimisation.

- Lifestyle:
It has been among the key determinants of real estate sales. While its impact has been most significant in residential spaces, certain dynamics have been noticed in commercial spaces. With the emergence of more nuclear families and community living, the need for residential complexes has grown in large measure. With the pandemic and work-from-home scenario, the need for space, personally owned property, and stability have emerged as strong contenders. The co-living market is set to double in under five years, showing the buying and real estate potential in India's top 30 cities. (Source: IBEF)

- Suburbs:
The suburbs are mushrooming into thriving centres of an active lifestyle and good living. At this point, the affordability of the suburbs, the space, co-living lifestyle, slower pace, availability of larger homes, privacy, and increased connectivity to the city have proven a huge draw for potential investors. The suburbs are the place to watch out for.

- FDI: Following sanctions of 100% FDI in construction development under the automatic route, there has been a surge in FDI in the real estate segment. Construction today is the third-largest attractor of FDI in India with a little over USD 24 billion for the period between April and March 2020.

Real estate in India has had some remarkable gains and shows great promise. Making the most of the avenues available in residential and commercial opportunities will only help you be future-ready. Additionally, real estate is less volatile compared to stock market and makes it attractive as long term investment avenue.