Better days and positive signals for India’s real estate sector

V Nagarajan

India’s realty sector has been impacted since 2020 like many other sectors with the new variant posing new and formidable challenges now.

However, a paradigm shift has been noticed across select realty verticals. While consolidation has brought in a few leading developers to undertake new projects, global funds’ return to the Indian realty gave new hope to the budding entrepreneurs and established players.

On the residential front, preference has shifted to larger homes due to WFH concept making deep inroads in to the working pattern of techies. Wherever built units are available it was instantly absorbed to make way for better living conditions as the lead time for the new projects are getting longer than anticipated.

Indian residential market in 2021 showed a definite upswing. Between Jan - Sep 2021, 1.63 lakh units of new residential supply were added across the top seven Indian cities, 27 per cent higher than 2020 full year supply and 1.45 lakh units were sold, 5 per cent higher than in the whole of 2020, according to Anarock data.

The survey further reveals that many developers and entities sealed around 45 separate land deals cumulatively accounting for over 1,757 acres of land area across the top seven cities between Q3 2020 and November 2021.

On the commercial front, vacancy levels rose and the new launches took a beating. Rentals are being renegotiated on renewal.

Flex workspaces are leasing spaces backed by occupiers’ back-to-work plans and pre-commitments and occupied a significant share in leasing at 16-18 per cent in 2021. Total flex stock in metro cities is likely to rise to about 40 million sq feet in 2021, according to Colliers report.

Gross absorption in 2022 should be about 15-20 per cent higher as occupier confidence is back in the market.

In terms of global capital chasing real estate, office will continue to remain a dominant sector, but residential and industrial & warehousing will strengthen in 2022 aided by strong business fundamentals, said Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers.

The industrial segment is likely to see investments inching towards $1 billion in 2021, led by large global investors buying ready and Greenfield warehousing projects. Since last year, investors have been exploring industrial space. While data centres gained traction in 2021 from developers and investors, it saw the maiden investments deal in the life sciences sector.

As per a recent Colliers survey, industrial and logistics assets will be the most sought-after real estate assets in the APAC region, with more than 20 per cent of investors anticipating capital value gains of 10 per cent-20 per cent in value-add assets in 2022, supported by tailwinds and large-scale economic transformation.

The outlook for 2022 appears certainly better despite the healthcare challenges. However, with input costs soaring and periodical dislocation in supply chain management, residential property prices may appreciate by 5-10 per cent.

PE investments in residential sector may see upward trend. The share of PE in residential sector is already up to 22 per cent during H1, 2022 from 14 per cent over last year, according to Anarock survey.

 I have taken foreign citizenship and have ancestral property which was recently sold. What are the tax implications and in which bank account should I deposit money. How much funds can be repatriated abroad? Amit Kak, Sharjah.

Generally any gains earned on the sale of property is subject to tax in India. If it is held for more than two years, tax at 20 per cent plus applicable surcharge and cess would be charged. You are entitled for indexation benefit. Assuming you are an NRI, the buyer will withhold tax at the marginal rate applicable. Either you can produce a lower withholding certificate obtained from tax authorities or can claim refund at the time of filing IT return.

You may be subject to tax on such gains in your overseas country in accordance with local laws. You can check with authorised bank in India and usually it is credited in NRO account. You can repatriate upto two residential units sold in India.

I am a PIO and inherited agricultural land. Can I retain it and in case I wish to sell it what are the legalities involved? Shashi Khatwani, Dubai­.

As there is no inheritance tax in India, you can retain it. You have to apply to the local sub-registrar office along with the Will for completing documentation of transfer of property in your name. If you wish to sell it, it can only be sold to a person resident in India.