As per published research reports there is an above-average economic growth in India. Strong population growth, a large pool of highly-skilled workers, greater integration with the world economy and increasing domestic and foreign investment are expected to drive India?s real GDP by 6% p.a. over the next 10 to 15 years.
Services outsourcing revving up office demand. India is the prime destination for IT services outsourcing. In the coming five years, at least 55 million m? of extra office space must be completed in the premium office segment alone.
600 new shopping centres by 2010. India's burgeoning middle class will drive up nominal retail sales through 2010 by 10% p.a. At the same time, organised retail is becoming more important. At present organised retail accounts for a mere 3% of the total; by 2010 this share will already have reached 10%.
By 2030 India will need up to 10 million new housing units per year. Rapid population growth, rising incomes, decreasing household sizes and a housing shortage of currently 20 million units will call for extensive residential construction. The financing of owner-occupied housing in particular holds out enormous market potential.
Capital market still underdeveloped. The total stock of commercial property is estimated at over USD 300 bn. So far the invested market accounts for only USD 4 bn of this. Capital market products, such as commercial mortgage-backed securities or listed property vehicles are still almost entirely lacking.
Property investments in India are not risk-free. The lack of liquidity and upward pressure of pricing remain the main concern within the market.
You can look at real estate as an investment. Indians are known for investing substantial part of their savings in real assets. Investing in property is an old and a popular method. Real estate investment can be a great edge against inflation and most of the times it has an appreciation as long as you invest at the right time of the real estate cycle. They say it is a 7 year cycle, the current cycle is moving up from the bottom it had touched last year.
Real estate has always been looked upon as a great edge to inflation. It tends to be more of a long term investment, and so a lot of people who have other portfolios of investments will make real estate part of their portfolio because of the stability that it will add. It may not be huge gains over the short run, but it always moves in the right direction and in the longer run, real estate mostly turns out to be a great investment.
A big reason for real estate investment now is long term appreciation. Real estate has always done extremely well in that run. There are more short-term reasons for investing in real estate; that would be the short-term gain. There are a lot of reasons for investing in real estate. It is considered a high-risk investment, but the long-term returns are always quite substantial, and that's why people do it.
It can generate an ongoing income source if you rent it. If the rental yield is higher than the interest rate you pay on the loan for purchase of the home, then you have an arbitrage available. You can build an asset and benefit in the rise in market prices with borrowed funds. However you need to careful of future risk of interest rate going up, hence should have sufficient cash flows to bear the impact.
It is open to both private and public players. Compared to other investments, it is less as it cannot be damaged or stolen like artifacts. Its value does not see a lower swing touching zero like stocks, however risks like earthquakes, terrorism and natural calamities can erode the price substantially. Buyers should do proper due diligence relating to title of the property before buying.
An added advantage is the fact that the investor pays tax on these returns only when the property is sold, notwithstanding the periodic increase in value of the investment. Therefore, the returns continue to accumulate and compound without the investor having to pay any taxes on them. When purchasing real estate as an investment, you need to consider the cost of taxes and the way that you plan on renting it out.
Recently RBI announced that they would be publishing Real Estate indices for Delhi and Mumbai followed by other cities. This will give some indication of price movements in a city for the 1st time
