Is This The Right Time To Invest In India?
(We say Yes!)April 24, 2017
In the last two years, India has witnessed a change. We saw India emerge as the fastest growing major economy in the world with a growth rate of 7.6% in 2015-16. The government has been pushing for reforms in every sector and the economy is responding well to that.
With the current government enjoying full majority in the house, the developments and the policy actions have been super-fast. In the last two years alone, the government has cleared several bills that have promoted business in India. With the unnecessary regulations being done away with, FDI inflows are increasing. This is creating a positive sentiment amongst the investors about the brand India. With more money pouring in the economy, more employment opportunities are being created, leading to the general appreciation in the cost of living and this is permeating to all sectors.
With each subsequent budget, the government is allocating huge funds for infrastructure development. This year the allocation is a gigantic 3.96 lakh crore to the infrastructure sector. Such huge allocations to infrastructure will pressurize the demand of raw materials for construction. Check out the revision in the prices of cement and other raw materials in past one year. As the raw material for construction gets expensive, price for the final product will surely increase.
The government has also been promoting for construction of more houses through the housing for all scheme. Under this scheme, more than 2 crore houses are expected to be constructed. Our Government has extended loan subsidy benefits to lower and middle income groups and is expected to roll out more measures to include the higher income groups. The full effect of this scheme will only be seen when more projects materialize as per the directions of the policy, but one thing that can be predicted is the surge in the residential demand.
Finally, the government has been working on regularizing the real estate sector – first by introducing RERA, which will act as a controlling body for all real estate projects in India; and secondly by opening up the sector by allowing investments in commercial projects, by developing a framework for trading of REITs in India.
While RERA has already began to show its impact, with several developers rushing to complete their projects on time – to avoid heavy penalty, the trading of REITS in India is yet to be formalized. REITS’s are a type of derivative which are traded globally and will solve liquidity woes of developers by allowing investments in completed projects, giving developers the flexibility to use their cash effectively.
With these developments, the investor confidence in the real estate market has increased and given the low rates prevailing in the market since the sub-prime crisis, this is the best opportunity to invest in this market before the prices start taking off.