Essential Guide for Real Estate Investment

The Indian housing market has seen a significant year-on-year increase in prices, with an average rise of 19% by the end of March 2024 across the country's top seven cities. This data from Anarock, a real estate consultancy firm, suggests that now may be an opportune time to invest in property. 

According to Ravi Shankar Singh, managing director of residential transaction services at Colliers India, the sluggish phase of low sales volumes and minimal price appreciation between 2015 and 2021 has come to an end. Now we are witnessing a cyclical upswing which is expected to last for several years. 

During the stagnant period from 2015-2021, incomes rose enhancing affordability in spite of rising house prices. The current macroeconomic environment coupled with steady economic expansion, young population demographics and ongoing infrastructure projects have given support to this growth trajectory within the real estate sector. 

Prashant Thakur, regional director and head-research at Anarock Group highlights how functional Real Estate Regulatory Authority (Rera) across states has instilled buyer confidence while rapid urbanization continues driving housing demand. Despite home loan rates being higher than before (from around 8.35%), it hasn't deterred housing demands yet. 

For successful investment in real estates however one needs careful study and understanding about micro markets with high potential.  

Key criteria should include proximity or easy accessibility job hubs along with limited housing supply in that area according to Thakur.  

Singh also advises investors on paying attention towards proposed infrastructural developments like connectivity through transportation networks towards central business districts as well as presence of green zones and social infrastructures such as educational institutions & medical facilities etc., factors which enhances areas appeal greatly.  

Investors need to consider vacancy levels too since excessive vacancies could indicate oversupply thereby affecting returns adversely. 

In terms of configuring investments correctly based on local demand patterns; if predominant demand is for two-bedroom apartments then choosing a three-bedroom flat might not yield desired returns. 

Investors are encouraged to have an investment horizon of at least four to five years and avoid over-leveraging on future cash flows from the apartment. This is particularly important for double-income couples, where it is advised that no more than 40% of the net income of one partner should be dedicated towards EMI for the property, as recommended by Vishal Dhawan, board member of Association Registered Investment Advisors. 

Tax implications also need careful consideration; if a taxpayer holds a property as an investment and records it as capital asset then gains upon sale are treated as capital gains.  

Short-term capital gain (if held less than two years) calculated as sale consideration minus cost acquisition taxed at investor’s ordinary tax rate whereas long term-capital gain (if held over two years) calculated as sale consideration minus indexed cost acquisition taxed at 20%. 

In conclusion, investing in real estate requires meticulous planning and understanding market dynamics along with financial capacity considerations. Therefore professional help or advice can often prove beneficial in making informed decisions thereby ensuring profitable returns while avoiding possible pitfalls related to taxation aspects etc.