Source: Outlook —
The tax benefit on the principal and interest payment is a significant attraction of real estate investing, in addition to capital growth and rental yield.
The Union Budget and the Reserve Bank of India’s (RBI’s) monetary policy is vital for the real estate sector. One sets the tone for the economy and the other, the interest rate. But nether, it seems, is working in favour of the real estate sector.
In Union Budget 2023, there were no major announcements for the real estate sector to boost demand as expected by the industry. On the flip side, the government’s intention to move to the new tax regime is equally not complimentary for the sector either, as it will do away with the tax benefit that homebuyers enjoy on the principal and the interest components on home loan repayments.
The central bank also seems to be in no mood to take a pause on interest rate hike. As anticipated, the RBI hiked the repo rate by 25 basis points (bps) to 6.5 per cent. This will translate into higher equated monthly instalment (EMI) for investors (homebuyers).
The Appreciation
According to Anarock Research, the top-7 cities have experienced a growth of around 11 per cent over the previous five years. The current average price per square foot across the top-7 cities is around Rs. 6,150, which was round Rs. 5,551 in 2018. This translates into 2.07 per cent compounded annualised growth rate (CAGR) much below your savings bank account.
