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Home Buying: Elements That Drive the Home Buying Process
06 Dec 8 min Read Read by 1318
If you ask people what their most valued possession would be and chances are that buying a house will top that list! After struggling through a rough period, the real estate sector is once again showing encouraging signs of revival. There are a number of factors that are responsible for jump-starting the realty markets. Government backing, policy decisions, economic growth, the surge in residential & commercial real estate demand, availability of loans are some of the key elements that are driving the home buying process. Read on to know more…
- Steady GDP growth & FDI inflows
Over the last two years, the Indian economy has grown at a steady rate of 6-7 %. This Gross Domestic Product (GDP) growth also owes a lot to the real estate sector and its subsidiary industries. The Indian real estate industry is ranked 3rd in terms of direct, indirect and induced influence on all sectors of the economy and is expected to reach a market size of USD 1 trillion by 2030. Some estimates predict that by 2050 the real estate sector will contribute almost 13% of India’s GDP. The government is particularly pushing policies and regulations that are favorable for the development of the real estate segment.
Along with GDP, a positive Foreign Direct Investment (FDI) inflow, on the backing of encouraging policies of the government of India, has seen substantial financing by global investors in the realty markets. According to official data, the construction sector in India has received equity inflows of around USD 25 billion in the period April 2000-March 2019. Private Equity and Venture Capital investments in the sector have almost reached USD 1.47 billion between Jan-Mar 2019.
- RERA & GST
Real Estate Regulation Act (RERA) was introduced in 2016 & the Goods & Services Tax (GST) in 2017. These tax rand regulation reforms, necessary for streamlining complex and loophole-ridden archaic laws, have definitely changed the way the real estate sector does business. After some teething problems adjusting to the intricacies of the new reforms, which did reflect in a partial slowdown, there has been a gradual turnaround in the property market.
RERA has primarily bought in much-needed transparency in the steps to buying a house. A reform that strengthens and protects the buyer’s rights, RERA has put the onus of accountability on the builder for providing a structured timeline of project status, completion of projects at the pre-mentioned duration, and avoiding charging of hidden costs. There are clear rules and strict penalties on builders who violate RERA norms.
As with RERA, the GST is a tax reform that has made buying property easier for the buyer. Revised tax slabs, such as flat 5 % (earlier it was 12%) for under-construction projects, affordable housing schemes taxed at a marginal 1 % (previously 8%) while ready properties that have received the occupancy certificate (OC) charged no GST at all, these buyer-friendly changes to the taxation structure are meant to encourage investment in the real estate sector. In particular, the 1 % GST on affordable housing is a push in achieving the government’s stated target of ‘housing for all’ by 2022.
- Government schemes & proposals for realty segment
It is stated the objective of this government to make India’s economy a $ 5 trillion by 2024-25. It is a huge task and will require an all sector push to achieve the target. The real estate segment is expected to play a vital role in achieving the economic target and as such the union budget of 2019 charted multiple proposals, such as provision for construction of new public infrastructure on landholdings by the Central Ministries and Central Public Sector Enterprises across the country, reviving the NBFCs from the ongoing debt crisis and liquidity crunch, new model tenancy law, modifying TDS on immovable property to include other charges, etc. to provide the necessary impetus to the property segment. The plans for collaboration between builders and the government, especially in the mid-segment urban residential projects aimed at budget-friendly homes for buyers, will not only minimize risks but will also provide a more viable economic model of development for urban real estate and infrastructure.
- Rapid urbanization
India has one of the largest growing middle class with a healthy disposable income to spend. With a lot of the Indian population migrating to the lucrative employment opportunities (mostly IT & ITES companies) and a better standard of living in metros and cities, the demand for quality residential and commercial real estate is continuously rising. Mumbai, Bangalore, Delhi-Gurgaon and Chennai, Pune, Hyderabad, Chandigarh, Ahmedabad are witnessing high demand for the mid and luxury segments as they deliver an attractive ROI.
The growth in sub-industries such as retail, hospitality, commercial & business, and expansion of the IT & ITES, e-commerce, education, logistics, and consulting sectors has fuelled the demand for commercial space with the office space leasing, in the top eight cities, expected to cross 100 million square feet during 2018-20.
- Home loan facilities & attractive offers
You might have heard stories from your elders about how the funds for purchasing a house were collected with lots of difficulties and with many relatives, friends pitching in, in the hour of need. But luckily those times of struggling to put together funds for property purchase are in the past. Today, due to the bank’s easy loan facilities, the home buying journey starts off much smoothly. Multiple loan options, fast loan approvals, EMI (equated monthly installment) repayment facilities, etc. have meant that even a first-time buyer now has the means to purchase his/her own house.
In addition, to make the deal even sweeter to the home buyer, builders and construction companies often offer attractive subvention schemes such as no-EMI-till-possession where the buyer only has to pay 10-30 % of the total cost upfront and the rest after possession. The balance is paid by a bank to the developer as a loan under a three-way agreement between the developer, the buyer, and the bank. While the project is under construction, the developer pays the interest on the loan to the bank. The bank disburses money to the builder as construction progresses. These schemes are especially beneficial to those buyers who are living on rent until possession of their own property.
Mahindra Lifespaces, one of the most reputed real estate developers in India, has an array of residential properties for home buyers interested in investing in real estate. Practicing highest ethical standards and transparency in corporate dealings, and offering quality residential real estate with multiple projects in Mumbai, Bangalore, Chennai, Nagpur, Pune and Gurgaon in the mid-premium segment, Mahindra Lifespaces is committed to providing affordable housing combined with integrated living through businesses, infrastructure, social and residential facilities. To find out all about their ongoing projects please visit the website.
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