28/11/2016
🍃 *After few months,Real Estate will boom again!* 🍃
Please read: The reasons why?
(Kindly spend 2 mins to read the below statements)
Last few days there has been a surge of messages from "Whatsapp
Economists and Facebook Economists " with the simple theme that
real estate prices will fall drastically due to Demonetisation, ie ban on
Rs 500/Rs 1000 notes.
Here's a few Point Summary of what actual experts with business and
economic logic say.
1. Demonetisation will flood the Banking system with funds driving
down both interest rates on Deposits and Loans
2. If Interest rate on FD is just 5-6 % interest on Home Loans will come
down to 7-8 % (since Banks keep an 2-3 per cent margin).
3. Historically at such Low interest rates Real Estate industry gets a
massive boost as property becomes attractive to everyone: Buyers,
Investors and even that invisible category called Businessmen/
Professionals.
4. Even when prices are same, Apartments come within reach of
Buyers due to lower EMI on Loans due to lower interest rate
5. Investors find Investing in property more attractive than earning a
paltry 5-6 % on Bank Deposit as simply buying and renting out gives
them more return. PLUS they create an asset and earn appreciation
over a period of time PLUS they get income tax deductions
6. Shopkeepers, Retail Malls, Corporate Houses and even
professionals like Doctors, Consultants, CAs jump in to buy property as
they want preferred location and once that's gone they may never get
that chance again. So, they buy at the first available opportunity instead
of waiting for prices to fall.
7. Demonetisation will see the most money flowing in banking system
from people in the unorganized / small scale sector: Farmers, Traders,
Tailors, Hoteliers, Beauty shop owners, Tuition classes, small
contractors, House Maids, Drivers, Security Guards etc. Crores of new
people entering Banking system means that they will also be eligible to
get bank loans and fulfil their dream of owning a house
8. Government will have money to invest in infrastructure as Banks will
deploy lakhs of crores in Government Securities. With a few lakh crore
at its disposal, Government can only boost funding to infrastructure
schemes such as Smart City Mission, Swacch Bharat Mission,
Housing for All etc which will in turn boost real estate too and make
foreign investors invest in a fast developing country.
9. New Airport in town, better connectivity to National/State Highway,
Up-gradation in City Transport all lead to increase in demand and
prices of properties in the city's
10. It is interesting to note that real estate prices show slower rise in
countries which have a fully ready infrastructure like USA, UK, Japan
etc. Whereas in a developing countries like India, there is a vast
difference in prices in a City before and after creation of Infrastructure
Conclusion:
In the final analysis, recent developments such as passing of Real
Estate Regulation Act, Demonetisation, Goods and Service Tax etc
combined with Government focus on infrastructure will only serve as
positive factors for growth of Real Estate industry
Factors of Real Estate Industry which get missed due to one-sided
picture created by social media:
1. Real Estate Industry contributed 7 % to India's GDP.
2. Second Highest employer after Agriculture.
3. Real Estate Industry supports more than 140 allied industries from
large ones such as Steel, Cement and Transport to cottage ones such
as bamboo and rope making.
4. Real Estate Industry caters to the basic need of Shelter for every
citizen.
5. As per Government of India, more than 90 per cent of demand for
Real Estate Is in affordable and mid range category.
6. In era of mechanisation and automation, Real Estate is the only
Industry which still continues to provide regular employment to
millions of daily wage earners.
7. One of the only Industries which contributes large share of taxes at
all levels of Government: Local Government, ie Municipal Corporations
etc (Building permission charges), State Government (VAT and Stamp
Duty), Central Government (Service Tax and Income Tax).
8. Investments such as equity shares, Commodities like Gold, Silver,
Mutual Fund etc have seen large ups and downs. Real Estate is the
only asset class which has given stable and constant one way growth
over last
several decades.
9. Real Estate has both value in use and value as investment.
10. Real Estate investment is the best investment from a very long term
angle as taxation happens only on sale and in case of reinvestment
100 % tax can be saved.
11. With Indian economy becoming increasingly urbanized, it is
expected that more than 50 % of India's population will live in cities by
next decade. This massive change in demographic and economic
profile of the country will give big boost to real estate over.
