Is Property Market Likely To Improve By March 2016?

Global rating agency Fitch has said that the investment climate in India aided by reduction in interest rates will improve its property market by the end of March 2016.

Notably, the Reserve Bank of India, India's apex bank, has cut the key policy rate by 0.50 per cent since January this year, encouraging a number of commercial banks to cut interest rates for home loan borrowers. This is expected to help demand from home buyers and investors. 

Forecasts for India's GDP growth are also predicted at 7.5% instead of 6.2% for 2015-16.

Will the predictions be true? Looking at the real estate sector and factors fueling its growth, no estimates look far-fetched.

In the Indian business scenario, real estate is the second most dynamically profitable sectors after Information Technology. In recent decades, real estate has turned out to be one of the most leading sectors in terms of revenue generation and returns from investment. Much of this is led by increase in population and demand for residential units in India. 

With the promise this sector holds, more and more businessmen and investors are engaging themselves in real estate transactions to make profits quickly. Also, banks are facilitating loans to the realtors and developers along with financial institutions that provide funds for real estate business.

In the present times, the consolidated value of country's residential and commercial real estate is pegged at approximately 50 billion dollars. This number is expected to grow by 25% by the next year i.e. year 2016. The expansion of IT industry and increase in incomes of urban middle class families are some of the leading factors behind the growth of the property market at this pace.  

Much of the lucrative profits are being reaped by the commercial property market in India, as office establishments are regularly rented out by MNCs and BPOs. Over the years, a number of MNCs have set up base in India to expand their business, thus spurring demand for commercial spaces to develop. 

Most of all, the mobile nature of the Indian middle class is also a reason that brings a boom to the property sector. Nowadays, people are ready to pay huge sum on rent for flats and apartments in metros and big cities and other property sites. Thus, investors are investing heavy amounts on properties and flats that are available for sale. After buying the property, they often lease their property for rent, boosting the rental market of properties in India.

Changes in the policy of the government of India towards joint ventures and foreign direct investment has also given fillip to the real estate sector. Government has become more liberal and has also been relaxing trade rules and regulations for the MNCs. This means creation of more jobs, and enhanced employability adds to the demand for homes.

Some of the major reasons that should drive anyone to invest in the real estate sector are:

• The economic status of India is continuously improving, which leads to improvement in purchasing power of people. This creates more demand of properties and flats.

• The increment in literacy rate means more graduates every year and hence, the demand for additional official and industrial space increases itself.

• Due to affordable land and labour in India, foreign companies are very much interested to launch their businesses here. And for that, more corporate space is required.

• Property investments in India by foreign investors are yielding profits.

• Industrial development in textile, automobile, auto components, jewellery, pharmaceuticals and chemicals sectors is also one of the most interesting reasons to attract foreign investors to India.

• With the increased demands of properties and flats on sale, the property rates are going to increase with time. This will lead to the huge revenues and returns for real estate investors across the globe.

For those invested in the idea of investing in real estate in India, this seems to be the right time.