Is Investing In Real
Estate Still Beneficial

Definition
Investing in real estate involves purchasing, owning, managing and renting or selling real estate
for scoring profit figures. Real estate is a capital intensive asset lacking in impromptu liquidity and
comprises of land along with the building constructed on it as well as its natural resources like
framed crops and livestock, uncultivated flora and fauna, water and minerals.

Types
Real estate may be divided into three sub divisions based on its usage:
• Residential like houses, undeveloped land, condominium and townhomes.
• Commercial like warehouses, office buildings and retail store buildings.
• Industrial like mines, factories and farms.

Advantages of Real Estate Investment
• It acts as an ongoing income generating source aiding in wealth building.
• It usually undergoes a value appreciation over time.
• Cash flow generated out of real estate is more stable in comparison to other in
come sources.
• Real asset investment leads to diversification of asset base. It has an inverse rel
ationship with stock market. Thus real estate market shall garner considerable r
eturns even in the face of economic downfall.

• Value appreciation and rental income combinedly beats inflation blues. When t
he investment is done properly, real estate returns can outsmart inflation figure
s by leaps and bounds.
• Tax benefits can be claimed if real estate investment is made by availing a hom
e loan. Interest paid on home loan is subject to tax deduction u/s 24 up to a m
aximum of 1.5 lakh INR. When the property gets sold after a time period of 3 y
ears from the date of purchase, long term capital gain tax @ 20% flat will be c
harged after providing benefit of indexation.

Current Scenario
Real estate has been a highly thriving sector of India’s developing economy. De
monetization drive, Benami Transactions (Prohibition) Amendment Act, GST imp
lementation, FDI relaxations and Real Estate Regulatory Act (RERA) have come t
ogether to usher in confidence amongst developers, consumers and investors.
With more organized players having good reputation in the market, the surgin
g down prices of real estate will soon come to a halt in larger cities. Thus it is a
n ideal time for home buyers to proceed with their ambition as market players
will be offering the best price possible to lure in customers. With banks relaxin
g down stringent home loan requirements and lowering home loan rates, dem
and for the same is expected to increase phenomenally.

Impact of GST on real estate
The revolutionary GST tax regime makes tax collection an easy process with
overall taxation level moderation. The single level tax comes as a breather
to this heavily taxed sector. Although the tax rate has not been finalised yet
expectations are for a 12% tax bracket. The GST implementation is expected
to instill buyer confidence and ensure transparency.

• Residential housing – The GST level will be assuaged by the low home loan
rates. Although it won’t be of much help in the short term but stakeholders
will be benefitted in the long run with impact varying according to cost
structure, input credit transferred and property completion status.
• Affordable housing – It is currently exempt from service tax but the
government is expected to announce a clarification regarding either its
applicability or prolonged exemption. This will ensure that the developers
and promoters do not pass on the burden of cost inflation to customers
opting for affordable housing scheme.

• Rental housing – The end user driven demand for rental housing will make
sure the real estate sector does not undergo any slump even if GST is levied
on residential leases.
• Commercial housing – The existing rate of service tax on commercial leases is
15%. Thus a 12% GST implementation is expected to neutralise the same.

• Rental housing – The end user driven demand for rental housing will make
sure the real estate sector does not undergo any slump even if GST is levied
on residential leases.
• Commercial housing – The existing rate of service tax on commercial leases is
15%. Thus a 12% GST implementation is expected to neutralise the same.

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