Reports are emerging that this is the perfect time to buy property in India. Many first time homebuyers may become tempted to invest in real estate in India as loans today are cheaper than they have been for many years and also because markets are on an upswing.
Yet experts still believe that investors should act with prudence. Prices for property in India are falling yet real estate insiders caution that an uptick in demand may take longer than many anticipate. Stock and real estate experts believe that unlike in the past, the stock market and the price of real estate may not move in sync. It’s likely that the stock market will rise to higher valuations while the value of property in India remains the same or falls.
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New Kid in Town and New Rules
Affordable housing is the new kid in town. There are reportedly six crore affordable housing units being built across India. Affordable housing carries a price tag that can be anywhere between 20 to 50 lakhs and it is at these price points that the largest number of new residential properties in India are being launched. Experts also claim that the rules of the game have changed as with the introduction of the finance bill in the latest budget, it may no longer be as benign for households to own more than 1 property in India. This will lead to lower demand for houses.
The Rise in FSI
Experts believe that the government intends to keep the supply of new unit’s high which will, in turn, keep new units affordable. An increase in the FSI means that more units can be built on the same patch of land than could be built by builders earlier. The government is pushing its agenda of providing realestate in India for the masses and may neglect other housing segments.
Stocks in Relation to Real Estate
In the past, many of those who invested in real estate did so after making money in the stock market. Such investors would park their profits earned during a stock market boom into the real estate sector. However, this trend is unlikely to be repeated this time as there has been little wealth creation this year even in the stock market. Hence less capital is expected to flow into real estate leading to lower realty prices for the long term
Additionally, it may not be just a great idea to invest in property in India since real estate devalued nearly 14 percent between 2015 and 2016 while other asset classes appreciated in value.