WHY TO INVEST IN REAL ESTATE

Ashwani Prakash Executive Director, Paramount Group of Companies

In any developing economy like India, housing assumes great importance and the need to create space for people to work and live, which in turn stimulates the development of other related infrastructure.

In order to cover the persistent gap between demand and supply, the predominant trend has been to set up world class business centres and residential complexes bearing distinctive corporate stamps. So distinct are some of these locations that they are being termed as the “Temple of Modern India” and have changed the urban landscape in our country. There was a time when the real estate market in our country was considered as an unorganized sector.

Things have clearly changed today. Developers have realized the merits of corporatizing themselves. Almost all big developers and leaders are now a professionally managed group. This aspect has brought in the professional players equipped with real estate expertise, facilities and introduced new technologies, which have enhanced transparency in the corporate working. They can now analyze & monitor their projects more closely.

The objective of analysing before hand is to help the financers/banks and also the end-users to take a decision while they invest in real estate.  Today almost every bank and housing finance company have strong tie-ups with the developers and they are keen to lend the projects with higher ratings or proposition.

Real estate is one of the hottest and biggest asset classes in the world. Due to the existing gap between demand and supply in India, it has an edge over other asset classes like debt or equity.

If one has good holding capacity, unlike other asset classes, real estate rarely earns negative return and does not suffer high volatility. Over the years the value of real estate usually increases, this also makes it an effective absorber of inflation. Real estate not only reduces risk but also helps in achieving stable returns. Therefore, it is ideal for long-term investment.

Despite a historic recession worldwide we, in India term it as an economic slow down. The government and economic surveys are still predicting 6-7 percent growth rate.  In this scenario a potential investor can still look forward to dig profits from real estate.

Indian property market can be eyed for a wide variety of supportive reasons:

- Relaxed FDI Rules implemented by Government of India has invited more foreign investors. The revised investor friendly policies have allowed foreigners to freely invest in Indian Real Estate. The foreign funds are now flowing freely in this sector and is the most lucrative ground for them to invest.

- With increasing number of nuclear families,  lowering of interest rats of housing loans and implementation of sixth pay commission not only by Central Govt. but also by some of the state governments have increased the purchasing power of  the people and is likely to create demand in real estate sector.

- In many of the key sectors like Auto components, Telecommunication, Chemicals, Apparels, Pharmaceuticals and Jewellery, India is now matching the best. This positive attribute of India is definitely going to attract more foreign investors into real estate.

- India has its own geographical importance in Pacific region and  with comparatively cheaper manpower, it has attracted almost  all the reputed MNCs. In the near future also this factor will definitely attract more companies to initiate their operational base in India thus creating more demand for corporate and residential space in the country.

- Real estate investment in India still yields good dividends better than any other investment with a rare chance of negative return.

- Emerging hospitality or hotel industry due to exceptional inbound tourism has also given support to the real estate.

- Development of SEZs has also given a new opening for real estate investments.

In India, even after the slow-down of economy there exists a big gap between demand and supply.  Even today the real estate investment involves minimum risk with maximum returns, having strong growth opportunities. Therefore, this is the right time to invest in real estate.