With the festive season on, the Real Estate is sprucing up with the demands and the increasing sales. India – the land of festivals holds a deep connection between the festivals and markets. Real estate investment is driven by sentiment, and the festival times are considered auspicious for the investment.
The occasions attract worthwhile offers from the various Real Estate Developers and complementary sectors like banking. It has been a practice for decades that many companies announce schemes to boost sales tapping the sentiments of the population. Amid the glittering offers from various private companies, this year the government also has made announcements as a Diwali gift which provides impetus to the market and is expected to continue for the rest of the year.
Factors Driving Demand in Real Estate Sector
Relaxed difference between Circle Rate and Market Value
The Finance Minister, Nirmala Seetharaman has recently announced that the circle rate and market value can now have a maximum difference of 20%, which was 10% earlier. The circle rate is a minimum designated rate below which the transactions on a property cannot be registered. The increase in the difference between the agreement rate and the circle rate comes as a Diwali gift to boost the real estate sector.
The government levies the taxes based on the circle rate, otherwise called a ready-reckoner rate. The sellers could, therefore reduce tax expenses with the increased difference. It also means that the real estate developers can sell the properties at 20% below the circle rate. It invites the buyers and spurs demand in the market where the buyer is indirectly entitled to a discount of up to 20%.
Any further reduction in the rate, as a stunt to attract the buyers, would incur high costs that are calculated with the circle rate as the base. In simple words, the difference between the market value and circle rate would be taxed as ‘other income’ for buyers. The seller also pays the capital gains tax levied on the fixed circle rate if the property is sold with a concession of more than 20% on the circle rate, affecting the seller’s pocket.
The offer is valid up to June 30, 2021, for the immediate sale of residential units of value not more than Rs.2 crores. This deadline hastens and increases the rush in the market. This helps in clearing the unsold inventories, which reduce the demand-supply gap and triggers the market’s momentum.
Conducive market Conditions
The reduction in stamp duty by the Maharashtra government comes as a boon to the investors to reduce their expenses. The stamp duty has been reduced from 5% to 2% until December 2020 and would be 3% from January 2021 to March 2021.
The home loan interest rates are at the lowest in the past four decades. This lures the inland buyers who have dreamt of owning a home. Also, the pandemic has pressed the sentiment of owning a house that acts as both an investment and security.
The weakening of the Rupee is welcoming foreign investors. According to a report by a realty search portal, it has seen a spike of 254% in inquiries regarding real estate investments from NRIs.
Trending Investments like Warehousing and Integrated Townships
ESR, a company, based on logistics real estate platform, is planning to develop warehousing parks across the country, in Maharashtra, Gujarat, Chennai, Bengaluru, and NCR. This spurs demand for land in the areas surrounding the parks. It would invite various foreign investments.
The pandemic has created a demand for spacious homes due to the Work From a Home culture that demands a workspace. According to the FICCI-ANAROCK report, the luxury homes market has not much witnessed the turbulence of the transactions due to the pandemic. The buyers are inclined towards the assets with high-class amenities like clubs, workout spaces, sports lounge, and etcetera.
Accordingly, 15,000 housing units in the township projects across Bengaluru and Chennai by the Ozone Group are under planning and construction stage, and 8,000 companies have already been sold. This indicates the demand for residential properties with amenities. The demand comes in the wake of the government policies, and market conditions discussed earlier.
The low home loan interest rates might continue for another six months or a year to boost the sector and increase the sales to restore the market. The festive vibes that brought in various offers from the companies are expected to drive the year ahead.
If you have been waiting to own a property, this could be the best time! The tempting offers and the encouraging deals are waiting for you. Real estate has abundant investment options with a range of ticket sizes.
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Realty Sector FAQ's:
The circle rate is the rate at which the transaction on the property is to be registered. It is decided by the government upon which the duties and taxes are levied.
The maximum difference allowed between the agreement rate and the circle has been increased from 10% o 20%. The offer is valid up to June 30 2021.
No. If a property is bought much below the circle rate, say with a concession of more than 20%. The seller has to pay the tax on the difference between the circle rate and agreement rate as which is treated as “other income”. The buyer also has to pay capital gains tax that amounts to a higher value as it is calculated on the circle rate if you sell the property much below it.
The housing sector has seen pent-up demand during the festive season due to the offers and the government announcements that came as a Diwali gift. The luxury homes and the townships are also on their track. The investments in warehousing have been gearing up with the companies ready to develop warehousing and logistic parks across the country.