After three years of stagnation, India's real estate market is poised to rebound as more of India's population migrates to cities and the need for housing rises.
India's young workforce stands to profit from nearly historic affordability levels in terms of mortgage payments relative to income growth, which has fallen to 28% in the first quarter of 2022 from 53% in 2012. House prices in India are 3.2 times the average income, but they are 6.7 times that in China.
According to Morgan Stanley's research titled Emerging India in a Multipolar Globe, the five largest cities in the world with the lowest rental returns are all in China, making it one of the most expensive nations in the world. Residential inventory levels in India's top seven cities have fallen to a nine-year low of 24 months of sales. Nominal wage growth of roughly 8% should boost demand when supply decreases.
While Chinese property enterprises face debt deflation and decreasing asset values with a large debt load, Morgan Stanley believes that property markets in India have healthy debt ratios and a strong possibility of improving asset prices. Weak players have been mostly removed from India's real estate business. Developers have been fiscally responsible, cutting their balance sheet debt in half during the previous three years.
Real estate is fundamental to the investing cycle. While India's investment-to-GDP ratio is at 30%, China's has reached 45 per cent, with real estate investment accounting for a sizable portion of it.
According to IMF analyst Yuanchen Yang, the real estate industry contributes to around 29% of China's GDP, which is more than double the share in India. There are no dollar-denominated borrowings in the industry since Indian developers are not permitted by the Reserve Bank of India (RBI) to acquire loans from outside. The banking industry is substantially better now, with gradually decreasing nonperforming loan (NPL) levels and no asset quality problems. According to the RBI, businesses have witnessed consistent net profit-to-sales increase over the last year and are sitting on piles of cash.
True, geopolitical uncertainty will cause challenges for India. Inflation and global supply chain disruptions will test the government's capacity to run the economy smoothly. However, macro fundamentals are better today than in 2013-14. However, unlike China today, Indians benefit from a thriving real estate market and global corporations looking for more stable and cost-effective alternatives to China. The setting is for Delhi to embark on an investment cycle to pave the way for future prosperity. In this way, India may genuinely emerge from China's shadow.
The Indian residential sector is projected to remain healthy throughout the holiday season. Despite the RBI's recent fourth consecutive repo rate rise, which resulted in higher house loan rates, housing sales are expected to stay around the same as last year.
According to a real estate consultancy firm's research, 91,000 units were sold during the holiday quarter of Q4 2021. Even though house loan rates and developer pricing have risen in response to the RBI's 190-bps repo rate hike and higher input costs, the sales trend will continue this year. Grade A developers are reporting solid sales despite a price increase, which will keep average home prices from falling much in the coming holiday quarter. Only smaller developers may lower their pricing to entice purchasers over the upcoming holiday season. It is expected that residential demand is projected to remain stable and driven chiefly by end-users, preventing any artificial speculative increases. Grade A developers will continue to dominate and increase their market share in the residential sector.
It is advised that the funds be distributed to each co-investor in proportion to their initial investment in acquiring the asset. While reducing disagreement among partners, it will also assist in ensuring transparency in the contract by allocating proportion to the percentage of the asset they own. This will also allow each partner to pay capital gains tax on the sale revenues after deducting the cost inflation index advantage.
In the absence of clarity on the sort of PoA granted to your relative, it should be emphasised that if the primary purpose of granting the PoA was for acquisition, then its purpose was fulfilled. A study of the details would reveal whether he has been given further privileges. In such a case, it is critical to eliminate any possibility of future disagreement.