Food, shelter, house, and the internet are the basic human needs of the new age. Our ancestors have advised us never to sell land or houses unless it is the only option left for finance. Hence, the natural outlook of the real estate market and the behavioral patterns in India have always been bullish. Let's look at the real estate market outlook for the year 2022.
Low Home Loan Interest Rates Contribute to Affordable Home-Buying
- With the accommodative stance of RBI in October 2021, the repo rate remained unchanged for the 8th time in a row.
- An increase in the supply of something has an impact on its price. Interest is the price of money. Thus, reducing the repo rate increases the system's money supply, thereby decreasing interest rates.
- The reduced repo rate keeps the interest rate on home loans to as low as 6.95%. Using the home loan EMI calculator with the given principal amount, one may easily calculate the monthly outflow.
- The monthly outflow reduces with reduced home loan interest rates, and home-buying becomes affordable.
Real Estate Market Outlook for 2022 in India
- As the corporate environment increases, the demand for office spaces increases. It improves the semi-urban and urban vicinities around the corporate firms. Accordingly, the market regulator, the SEBI, has approved Real Estate Investment Trusts (REITs). Thus, investors can also reap the benefits of the real estate sector by diversifying the portfolio risk. An ICRA research concludes that in 2022 REITs are expected to raise more than Rs. 3.5 trillion.
- Retail real estate has already attracted private equity investment amounting to USD 220 million in 2020, and thus, it is anticipated that Grade-A office spaces will cross 700 MSF by 2022.
- A property consultant, Anarock, expects India to build 100 new malls by 2022.
- The consumer base is well-informed now. The family-owned proprietor businesses are now shifting towards corporate firms with more professional competencies.
- The Pradhan Mantri Awas Yojana will increase the paused growth in the residential sector To provide 20 million affordable housing in the country's urban areas by 2022.
- The GOI has aimed to provide housing to each Indian citizen. It works as a catalyst to increase economic activities for cement, steel, logistics, and other 250 connected sectors.
- An increase in affordable housing will further boost the demand for commercial office spaces in urban cities. Also, it is expected that the cross-border real estate investment will infuse around USD 2.5 billion.
- As per the ICRA report, an underlying demand has remained intact even after disruptions in Q1 of FY 2022. Further concession in stamp duties and other incentives by a few state governments has helped recovery in the second half of FY 2022.
- To boost opportunities for real estate developers, the GOI initiated the Smart City Project that aims to build 100 smart cities across the country.
- The Union Budget of FY 2021-2022 has extended the benefit of tax deduction up to Rs. 1.5 lacs towards interest cost on home loan till the end of the fiscal year 2021-2022. It would further induce the demand for 2022.
- From October 2020 onwards, RERA is now extended to apply to Jammu and Kashmir. It allows buying and selling properties by any Indian citizen without any restriction.
- Also, using the priority sector lending summed around Rs. 10,000 crores, the GOI has created the Affordable Housing Fund (AHF).
The growth in the real estate sector was paused due to COVID-19 restrictions. However, the sector is expected to boom. Given the support from the Government of India and approval of REITs, the real estate outlook for the year 2022 is bullish. For more insights and interesting facts about the real estate sector, visit www.tatacapital.com.