NEW DELHI: Investors have made the most out of Indian markets thanks to economic growth and rising demand for real estate assets in the country. Over the years, real estate market dynamics have changed due to policy reforms. RERA has not only consolidated the real estate sector but has also brought transparency. It has infused confidence in investors to enter the market.
While buying a property, investors have high aspirations in terms of returns but the same turns into anxiety when returns don’t come. Be it residential or commercial, one must consider a long-term horizon for good returns.
Real estate is certainly a wealth creation tool but to get the expected returns depends on many factors such as property, location, market trends etc. Indian buyers are more informed today than they were a few years back. However, they still need more information to fulfill their investment aspirations.
Real estate has been the engine of growth and employment in most emerging markets. India is an emerging market and the overall real estate trends appear favourable today. It is important to know about change in policies and follow market trends so you know what may impact your investment in the long term. One must choose the right builder, good quality property, good project, location and adapt changes as per the circumstances. Whether to buy commercial or residential is a tough decision but this will have large impact on your investment. Buyers need to ask relevant questions.
One significant change has been highlighted in an Anarock report – Between 2015 and 2018, Indian real estate witnessed a total inflow of USD 14 Bn worth Private Equity (PE) investments. While 2015 and 2016 together saw investments of USD 5.4 Bn. Momentum was seen in the last two years when investments grew to USD 8.6 Bn collectively. This growth can be attributed to the various reformatory changes in Indian real estate that helped increase transparency and thereby boosted investor confidence.
Over the past four years, commercial assets became top preference of PE investors comprising more than 70% of the overall investment share in 2018 compared to just 33% in 2015. In contrast, residential space lost its numero uno position with its share declining from 53% in 2015 to as low as 7% in 2018. This suggests that the real estate sector keeps opening new avenues for investors and they can earn returns if they read the market well. Currently, rising demand for Grade A offices, co-working spaces, student housing, warehousing and arrival of REITs offer high potential for returns in the future.
Shobhit Agarwal, MD and CEO, Anarock Capital says, “FDI policy relaxation coupled with landmark reforms (such as RERA, GST, Insolvency and Bankruptcy Code, adoption of REITs, etc) are altering the sector from being an unorganised one-man driven family business to an organised, structured and corporatised with financial discipline.”
Long-term V/s short-term investment
Historic trends suggest that long-term real estate investments have yielded good returns as compared to short-term schemes where uncertainty is high. Due diligence is a must when you are investing your hard-earned money in a property.
RERA and Builder-Buyer Agreement
The Real Estate Regulation (and Development) Act, 2016 (RERA) came into effect on May 1, 2017. If you have invested in a property in the pre-RERA era, it is recommended that you get your Builder-Buyer Agreement RERA compliant as it will protect your investment. You must speak to your developer to stay updated on RERA registration and other changes he makes in the project.
“A builder buyer agreement has to be as per RERA. Existing buyers must also ensure that their agreement of sale is as per RERA regulations. It will help them address their issues in case of violations by the developers. Builders also need to inform buyers about RERA registration,” says Kalpana Misra, member, UP RERA.
RERA defines the builder-buyer agreement as ‘agreement for sale’ and section 4 lays down that the builder is responsible for all obligations, responsibilities and functions as per the agreement for sale. If you have invested long back, get your old builder-buyer agreements RERA compliant.
Choosing the right forum
Choose the right authority to file your complaint depending on the hierarchy instead of going to large forums where you may not find solutions for minor disputes with your builder.
Firstly, speak to your builder and try to get a solution from him. Accordingly approach the higher authority, depending on the response you get on your complaint. Filing complaints at wrong forums may delay and complicate your case.
Protect Property Reputation
Often it is seen that social media platforms or other channels are used to vent your anger. This way the reputation of your property is at risk. Remember, that the property and rental values generally depend on the reputation of your property. One must use the right forum to address a grievance avoiding tarnishing the reputation of your property which otherwise could give you good returns and rentals in future. A project with a tarnished image is unlikely to draw good returns and rentals.
“There are some developers who have not kept the promises they made to buyers so buyers go to various forums including social media, to badmouth such a developer and his project. It not only harms the interest of the developer but also impacts their own future prospects in the form of lower resale and rental value,” explains Deepak Kapoor, Former President, CREDAI Western UP & Director, Gulshan Homz.
There are many factors which work in favour of real estate investments. However, buyers need to be informed, aware and take the right steps to protect their investment and get the most out of the market.