Rise in Demand for buying houses in the affordable housing segment

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    Rise in Demand for buying houses in the affordable housing segment

    The Information mentioned here was last updated on:

    6/7/2024

    Rise in Demand for buying houses in the affordable housing segment.

     There has been a good rise in Demand for buying houses in the affordable housing segment. The major customer base for flats that are offering the affordable housing flats are people of the middle-class or the upper-middle class. Even in the middle-class segment mainly the salaried people are going ahead for purchases. As the majority of India’s population comes under middle-class there are many people who are actually very interested in buying a house in these projects. Hence, there was a major rise in the demand for buying houses that come under the Affordable housing segment. 

    There was a study that was conducted by a couple real estate firms and consultancy firms that showed that the top 5 cities in India that are... Chennai, Hyderabad, Mumbai, Delhi-NCR, Ahmedabad have a very high and rising demand for affordable housing. This increase in demand has led to the big players in the market to build houses that do not exceed 50 Lacs. Builders have started targeting the suburbs of the cities for people to make future investments. 

    The change in mentality of people in recent days has also led to the rising demand in the affordable housing sector. In the early days people preferred buying land and making the house themselves as they used to live as joint families. Now, in modern India there is a major rise in the number of people living independently or in nuclear families with a maximum of 1 child. This eliminates the option of building the house from the ground up. With all these developments happening there is a major rise in the demand for studio and 2BHK apartments. 

    In the most recent days, the Government has also taken up initiatives to give the common folks buying apartments in these segments a good benefit under PMAY. The Government has also reduced the taxes that used to be levied on real estate. The GST for these houses is just a mere 1% which relieves buyers from the additional charges that used to be prevalent! The migration of people from the rural areas to the city has also had a major increase. 

    The booming economy and the rise in pay-outs for an individual has made it possible even for the younger generations to buy properties these days but only in cases where the prices are realistic! IN the last couple of years, affordable housing is the only segment where transactions have happened in real estate. Pradeep Aggarwal, co-founder and chairman of Signature Global, which has delivered one affordable housing project and has 12 others in the pipeline, talks about why the segment is getting traction and its prospects.

    There are various reasons why the real estate market is in such a situation since the last 5-6 years, but the most important factors that affected the real estate sector was absence of a regulator and mismatch in demand and supply. In any unregulated industry, it is easier to take things for granted and this has backfired in real estate. Besides, mismatch between demand and supply and decline in speculation-driven demand impacted sales. Now there are no speculators because those unrealistic price escalations are not possible anymore.

    As far as affordable housing is concerned, you need to understand that 95% of the country’s population consists of the lower middle class or economically weaker section. These sections are driving demand in affordable housing. Moreover, in the past few years, the government’s focus and incentives to developers as well as homebuyers was why demand in the segment went up. I look at affordable housing from a different perspective; it is not just real estate; it is the need of the masses.

    It is difficult to segregate the buyers. But about 70% of the buyers in this segment are salaried individuals. This salaried class, I suppose, is buying it either for own use or may opt to rent it out later. I don’t think there are any speculators in this segment, because if I talk about Haryana government’s affordable housing policy, there are restrictions on transfer of property till the buyer gets possession and even a year after that. I consider them as end users or serious investors, and not someone buying for speculation.

    The next biggest initiative that has contributed to the residential market boost is Affordable Housing, by the ruling Indian government. Incentives as part of the same have been aiding in the recovery of the overall sector, by augmenting housing supply. Developers have been investing a lot more into infrastructure and better connectivity, thereby fortifying this progress.

    The government’s ‘Housing for All by 2022’ vision as part of Affordable Housing is expected to be the key catalyst of it emerging as the most powerful segment in the residential real estate market in the near future, with the biggest developers heavily investing in it. The segment contributing to 41% of new supply in 2018 serves as a testament to this market forecast, all of these well-defined policies, initiatives, and incentives, combined with the changing dynamics of the nation’s population make for reflection of greater developments in the real estate industry. With student housing on an all-time high, coupled with the Government’s continued efforts with regard to the affordable housing initiative, the real estate industry in India is primed for a magnificent comeback. Moreover, with the rising number of the young working population, there is an ever-growing demand for housing, thereby affirming the immense potential for residential real estate to hold its own as a lucrative market for investment

    Real estate investment has long been heralded as a reliable avenue for building wealth. Unlike the erratic nature of the stock market, real estate offers a tangible asset that appreciates over time and generates steady income. But what exactly makes real estate such a lucrative investment? Let’s dive into the various facets of return on real estate investment (ROI), its benefits, potential pitfalls, and strategies for maximizing your returns. What is ROI in Real Estate? Return on investment (ROI) in real estate is a metric used to evaluate the profitability of an investment. It’s calculated by dividing the net profit by the total cost of the investment, then expressing it as a percentage. In real estate, ROI typically manifests in two main forms: capital appreciation and rental income. Capital Appreciation Capital appreciation refers to the increase in a property’s value over time. Several factors can influence this appreciation, including: Location: Properties in desirable locations tend to appreciate faster. Market Demand: High demand for real estate can drive up property values. Economic Conditions: A strong economy generally boosts real estate values. Property Improvements: Enhancements and renovations can significantly increase a property’s market value. Rental Income Rental income is the revenue generated from leasing a property to tenants. This income stream is particularly attractive for several reasons: Steady Cash Flow: Regular rental payments provide a consistent income. Mortgage Coverage: Rental income can help cover mortgage payments, easing the financial burden. Passive Income: Over time, rental properties can become a source of passive income, especially if managed by a property management company. The Benefits of Investing in Real Estate 1. Tangible Asset: Unlike stocks and bonds, real estate is a physical asset that you can see and touch. This tangibility offers a sense of security and stability. 2. Leverage: Real estate allows investors to use borrowed capital (mortgages) to purchase properties. This means you can control a large asset with a relatively small initial investment. 3. Tax Benefits: There are numerous tax advantages for real estate investors, including deductions for mortgage interest, property taxes, operating expenses, and depreciation. 4. Inflation Hedge: Real estate values and rental income often increase with inflation, providing a safeguard against the eroding value of money. Potential Risks of Real Estate Investment While real estate can be lucrative, it’s not without risks. Here are some potential pitfalls to be aware of: 1. Market Volatility: Although generally less volatile than stocks, real estate markets can still fluctuate based on economic conditions and market trends. 2. Property Management: Managing rental properties can be timeconsuming and challenging, especially if you have difficult tenants or maintenance issues. 3. Liquidity: Real estate is not a liquid asset. It can take time to sell a property and convert it into cash, especially in a slow market. 4. Upfront Costs: The initial costs of buying real estate, including down payments, closing costs, and renovations, can be substantial. Strategies to Maximize Your ROI To maximize your ROI in real estate, consider the following strategies: 1. Location, Location, Location: Invest in properties in desirable locations with strong growth potential. Research local market trends and economic forecasts. 2. Buy Low, Sell High: Look for undervalued properties or those in need of renovation. Improving a property can significantly boost its value and rental income. 3. Diversify Your Portfolio: Don’t put all your eggs in one basket. Diversify your real estate investments across different property types and locations. 4. Leverage Wisely: Use financing to your advantage, but avoid overleveraging. Ensure you can comfortably cover mortgage payments and other expenses. 5. Professional Management: Consider hiring a property management company to handle daytoday operations, tenant relations, and maintenance issues. This can save you time and stress while ensuring your property is wellmaintained. 6. Stay Informed: Keep up with market trends, economic indicators, and changes in real estate laws and regulations. Being informed allows you to make strategic decisions and adapt to market changes. Personal Insights and Conclusion Investing in real estate has been a cornerstone of my wealthbuilding strategy for years. The combination of capital appreciation and rental income has provided me with a stable and growing source of revenue. While it’s not without challenges, the benefits far outweigh the risks when approached with careful planning and due diligence. Real estate investment requires a commitment of time, money, and effort, but the potential rewards make it worthwhile. Whether you’re looking to diversify your investment portfolio, generate passive income, or build longterm wealth, real estate offers numerous opportunities. Remember, the views expressed in this blog are solely my own. As with any investment, it’s crucial to do your own research and consult with financial advisors to tailor your strategy to your unique circumstances. By understanding the nuances of ROI in real estate and implementing smart investment strategies, you can navigate the market effectively and achieve your financial goals. Happy investing!