Why India's Housing Market Is Set To Get More Investment
A recent report by investment management services firm Milestone Capital Advisors estimated the total investment in India's residential real estate in 2015 at $520 million. In 2016, interestingly, $420 million, or nearly 80 per cent of last year's investment was received by the sector in the first two months.
MakaanIQ looks at why the sector is high on investment:
- Private equity firms invested heavily in Indian real estate, especially the housing sector. The reason could be that the firms buy real estate assets when the demand is at its lowest. When demand is low, prices are likely to be low, too.
- With the real estate Bill getting approvals from both the Rajya Sabha and Lok Sabha, private equity investment in housing is expected to rise. This will also allow greater access to funds for real estate developers and home buyers. Also, this is likely to make the policy environment less uncertain in Indian cities.
- Indian cities, including Mumbai, Gurgaon, Bengaluru, Hyderabad and Chennai, are undertaking many major infrastructure projects. These projects are likely to drive up the demand for real estate. In cities that are well-served by infrastructure, for instance, a Metro line or outer ring road or bridge will not change real estate prices much. But in cities where such infrastructure is lacking, investment in these projects will radically raise the demand for housing. Investment in other real estate projects, too, will subsequently rise.
- Besides, as fuel prices are declining, real estate developers find that their costs are declining, too. So, they have more to invest in real estate projects.
- The real estate Bill is also expected to instil greater transparency in transactions in the property markets, as all the relevant details of a real estate project will be easily available online. This will lower the transaction costs in the market and instil greater trust in home buyers.
- The central government is also trying to make it easier to do business, and it has asked Indian states to emulate the policies of others with better practices.