Indian Real Estate Sector

 The real estate sector has the second-highest contribution in terms of GDP next only to agriculture. It accounts for 9% of total GDP in India.

This mammoth market segment is expected to grow to $650 billion by 2025 and rise to a trillion-dollar industry by 2030. It is estimated to contribute a GDP of 13%. This drive is primarily due to the easy availability of lands in the suburban markets.

Indian GDP Analysis

Indian Economy

The Indian economy has been characterized as a major growing economy due to the country’s strong trade and diplomatic partnerships. The growth of an economy is determined by the increase in annual GDP. The Indian economy which has been growing consistently has seen a dip in recent months. It grew 5% in FY 20 and has been considered one of the slowest growth since 2007. Many experts associated with Analytics and Banking has termed this as symptoms of an economic recession.

Economic Recession is characterized by sustained negative GDP growth is two or more subsequent quarters. Though India’s GDP has grown by 5%, the progress has been severely contracted. This could be an early sign of Recession. Eight core industries have reported a downfall of 2.1% as of August.

A recession is accompanied by business reporting revenue loss after being stable for a longer amount of time and high unemployment rates. The automobile sector has reported back-to-back losses and has relieved several people to keep the companies sustained and stable. The last recession which hit India leads back to 2007-2008 where the GDP fell to 7.6% affecting exports and business growth. But since then Indian ties with its global counterparts have increased. Many international organizations are setting up shops in India, each desiring a piece of the potentially ever-growing cake. 

An Economic Recession is characterized by sustained negative GDP growth is two or more subsequent quarters. Though India’s GDP has grown by 5%, the progress has been severely contracted. This could be an early sign of Recession. Eight core industries have reported a
downfall of 2.1% as of August 2019.

A recession is accompanied by business reporting revenue loss after being stable for a longer amount of time and high unemployment rates. The automobile sector has reported back-to-back losses and has relieved several people to keep the companies sustained and stable. The last recession which hit India leads back to 2007-2008 where the GDP fell to 7.6% affecting exports and business growth. But since then Indian ties with its global counterparts have increased. Many international organizations are setting up shops in India, each desiring a piece of the potentially ever-growing cake. 

Important factors

One factor which predominates the Indian Economy growth is Consumption; technically split into  Private Final Consumption Expenditure (PFCE) and Government Final Consumption Expenditure (GFCE). Over the past five years, the average consumption growth of Indian Households has risen to 7.8%. But in the June quarter, it has fallen to 3.1% causing a slowdown of the economy.

Another key factor that propels the economy is Investment with Gross Fixed Capital Formation (GFCF) as the primary constituent. Its contribution to growth has fallen by 6.2 percentage points between the periods of 2014-2019. Investors and entrepreneurs are reluctant to invest in potential companies and research, lowering of infrastructure development which ultimately leads to sluggish technological development.

How Recession has affected Real estate

In Real Estate both buyers and builders are facing their own set of problems.

Buyers have grown wary about investing in a property due to the growing delivery and transparency issues. A lack of greater transparency has led to corruption, money laundering and tax evasion. The government has initiated RERA, which has been reinforcing strict guidelines about the aforementioned issues. It ensures adherence of the builder to their stipulated delivery time and offers detailed information about the property to the buyer.

Real estate project launch and conversions graph

 It is evident from the graph the launch of new projects have declined (The new launches in NCR fell by a staggering 41%). However, the property sale has been steady even with the growing recession.

To determine the longevity impact on Real estate, let’s take a look at how the Indian Real estate sector behaved when the “Great Recession” hit India.

How “The Great Recession” hit Indian Real Estate Sector

From 2000-2006 Indian Real Estate industry was passing through a golden era. It was expected to rise to $90million by 2015 with an ROI of 13-16 yields.

Changes in housing prices during the years

 During 2008-2009, there was a staggering fall in house prices with buyers wary of investing due to further decline in value. Builders started enticing consumers through substantial discounts which went up to 30% in Q4 2008.

  • In Bangalore, the real term house prices dropped to an astounding 31%
  • In Delhi, a price fall of 1.6% was observed
  • In Mumbai, the price fell by 2%.

Demand for luxury properties fell by 50% while for affordable housing it dropped by 10%. Also, the mortgage market faced a hindrance in their expansion due to conflicting laws.

  • Banks offered loans to middle and high-income sectors which affected the low-income ones.
  • Interest rates ranged from 9.25%-13.25% for mortgages.
  • The Loan-to-value (LTV) declined to 75%

Economic researchers from Birla Institute of Management, Noida conducted a study based on certain hypotheses to figure out whether the recession would continue to impede the Indian economy or if it was just a phase.

The results showed

  • An increase in demand for real estate
  • A surge in the Price of Property
  • Increase in the launch of new projects
  • A rise in Competition
  • A decline in the Rate of home loans

As per the results in 2007, the Indian Real Estate sector has continued to grow at an impressive rate. New competitors have increased the launch in new projects.

  • Private Equity investments in the real estate market touched  a new high since 2008, with private equity players investing around $2.8 billion.
  • Residential projects attracted substantial funding.
  • Real-estate sales grew significantly in major cities like Mumbai, Hyderabad and Bangalore
  • The commercial sector sales witnessed spectacular growth with several large leases and buy-out transactions. The total office-space absorption rose to an impressive 35 million sq.ft.

This growth provides hope for recovery of the real estate sector with demand for properties to further increase in the upcoming years.

Is the Real Estate sector growing?

Similar to predictions during the period of the Great Recession, new predictions are turning up for the future of real estate.

According to Prashant Thakur, Director of Anarock Research, the real estate industry has taken an inevitable new trend. Affordable housing is gaining popularity and new projects are being launched with a strong focus in this category. He attributes the large volume of unsold inventory to the construction of projects with conflicting customer orientation as the demand has consistently increased.

Also, Rental housing, co-living spaces have become popular among the millennials. And, Real Estate Investors prefer commercial properties over residential properties as it garners significant ROI.

He also predicts the future of Real estate would thrive on the consolidation of the builders. 7 out of 10 builders will either consolidate or disappear with the well-established and reputed builders leading the charge. Buyers would also turn to these reputed builders for security and trust in delivery and transparency.

Should I really invest now?

Considering the facts and the studies, it is evident that this growth recession is just a phase and real estate sectors would continue to rise in value. Also, real estate is regarded as one of the safest investment choices. So, whether you are looking for a house to live in or a property to invest in, the recession won’t be an impeding factor. In fact, you could take advantage of this recession and buy properties at a substantially discounted price.

Property Quest During COVID 19 Lockdown

Properties in Chennai

The COVID-19 crisis seems to have frozen many business operations. Central and State Governments are working hard towards jumping back to normalcy. On the other hand, this has allowed us to spend quality time with family and even research about your investments, home, education and plan for your future.

According to the research by Spini, this could be the best opportunity to do our homework on your investments in property or the dream home.

Was the uncertainty in any market not existing earlier. Can’t say so! But it was a great advantage to have previous statistics and history. Now it is time to create statistics, history and think naive. We might not be able to do site-visits or enquire about the property in person. But this is an initiative to help you find a suitable property without your presence in person.

We always go through a few properties on cyberspace before going any further. The lockdown has allowed you to review almost all information online without commuting. We are helping you in this quest of finding a property by providing you with a solid course of action. We believe by the end of this quest you’ll be confident to grab your destined property. Happy questing!

We have jotted down a few items that you’ll have to go through to make your online property search a cakewalk. You might want to have a quick look through these for sure.

BASIC CHECKS

These are the basic things that you need to know about the property before delving deeper into its other advanced prospects.

  • LOCATION
  • READY-TO-MOVE-IN?
  • PRICE
  • SIZE OF THE PROPERTY
  • FLOOR PLAN / VIRTUAL TOUR
  • BUILDER’S REPUTATION

LOCATION

First things first. We always want a location that suits our needs. Location impacts many of the following checkpoints. Get to know your property more by asking for the exact location on the map. This would help you learn a great deal about the property. We can acquire the baseline value, get an idea of appreciation, learn about access to facilities such as hospitals, recreational space and educational institutions and a lot more.

READY-TO-MOVE-IN?

We need to know the completion state of the property. Find whether the property is ready to be rolled out. If not, get the project’s probable date of completion and possession. This completely depends upon your requirements. Few things are to be noted. For instance, let’s see if the property is bought with the bank’s assistance, then you might want to inquire about their policies on payments. The date of completion and possession must comply with your needs.

PRICE

An important factor to take keen notice is the pricing of the apartment. There are a few things that you might not inquire of normally.

  • The actual price or the market value of the property is usually given first hand.
  • The total cost of Ownership such as parking charges, stamp duty, registration charges, furnishings that are default, custom-made furnishings. This could contribute to almost 5-20 per cent of the market cost of the apartment.
  • Inquire about the total cost of running a home. This will include maintenance charges, property tax, approximate gas and water charges.

SIZE OF THE PROPERTY

Look for the following to understand whether the property suits your requirements. You might want to have a keen look at the following before buying a property.

Super built-up space: Usually the area mentioned in the brochures is super built-up space area. This includes common areas such as lobby, staircases, elevator lobby, shared hallways, storage rooms, electrical rooms and mechanical rooms.

Built-up area: Built-up area is the square footage including the wall area. The built-up area would also include, dry balcony, flower beds etc.,

Carpet area: Carpet area is the area from wall to wall in a property. This even excludes the area occupied by the walls. The carpet area of a property might be somewhere around 70% of the super built-up area. This would be the usable space inside the house. This could be a key deciding factor.

FLOOR PLAN / VIRTUAL TOUR

Floor plan: Floor plan is a spatial layout of a building. It gives an elaborate idea of the arrangement of living spaces within it such as different rooms, utility area, kitchen and balconies. The dimensions are mentioned. This gives us the idea and experience of living inside the house. You would want to have a look at the dimensions of different rooms and utilities available such as closet and other spaces.

Virtual Tour: Virtual Tour of the property could be an added advantage. We can have a closer look at the fittings, accessories that are available in the property.

BUILDER’S REPUTATION

Have a thorough survey at the builder’s reputation. This also can affect the services that are given during construction and later.

Track record: Renowned builders give the surety of quality, services and facilities. Review the number of years in business, number and quality of previously completed projects through reflections from customers.

Credibility: See whether the builder is true to the commitments made. Enquire about the projects that are delivered.

Financial Health: The builder should be able to keep the construction work rolling. A well-funded project offers the security of timely completion.

ADVANCED CHECKS

  • RENTAL ASSURANCE / RENTAL ASSISTANCE
  • RETURN ON INVESTMENT
  • APPRECIATION
  • LEGAL DOCUMENTATION

RENTAL ASSURANCE

The builder must be able to give assurance that there can be occupants to the building soon after it is done.

Rental returns: The investor/buyer of the property should be able to yield their fruit as soon as possible. It is likely to have a rental assurance of 8% of annual return from the property.

Co-Living: The concept of co-living which is popular among urban working communities can help you get better rent for your investments. Get the builder’s insight on co-living spaces to get more rental returns.

RETURN ON INVESTMENT (ROI)

Return on investment is the percentage of profit that an investment returns. We want high ROI to invest in a property. Location and builder’s reputation also affects the ROI. We must take a closer look at it before investing.

APPRECIATION

The property which appreciates with time will be most desirable. Look at the factors that influence appreciation in a property while buying. The key factors that influence the appreciation of property value are the location and the builder’s reputation. Other than this, any metro or big infrastructure that is built near your property can appreciate the value greatly.

LEGAL DOCUMENTATION

You can inquire about certain legal documents from the builder once you are set to buy the property. Revise the core documentation about the property such as follows.

Title deed/Sale deed

You have to make sure that the builder has got the rights to sell a property and that the legal documents are in place pertaining to his name.

Mother deed

This gives us the information about the origin of the property/ antecedent ownership of the property. This helps in further sale of the property. In case of the absence of the oringal Mother deed, certified copies should be obtained from the registering authorities.

Approval certificates The layout plans must be approved by the planning authorities. The layout must comply with the specifications of RERA, CDMA or the like.

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