Property: India

The future direction of the Indian property market is far from assured; on the one hand the real estate market in India is thriving with big name players such as Morgan Stanley committing substantial funds to the marketplace, but on the other hand ‘property India’ is an unattractive commodity for the smaller investor who has to wade through excessive and tiresome regulation and control and who is now faced with an increasing tax bill thanks to a government crackdown.

Indeed, the Indian government is cracking down on those who seek to exploit property in India for excessive profit and who fail to accurately report the value of their property assets for income tax purposes.  A brand new provision has been appended to the Income Tax Act in India to allow the authorities to impose a higher rate of tax on anyone caught inaccurately declaring the value of their India property assets and transactions.

In the past it was common practice for property investors and developers to declare a lower than accurate ‘registered value’ for their Indian property assets and to be taxed accordingly, but the new changes to the Income Tax Act will ensure properties are assessed by the tax authorities based on figures provided by the stamp valuation authority and if any discrepancy is found between the owner’s declared ‘registered value’ and the actual value of the property then owners will be punished and have to pay a higher rate of tax on the difference between the two values.

This particular taxation change coupled with the fact that the entire Indian property market is constrained by excessive and restrictive registration processes, heavy taxation, ineffective foreclosure procedures and complex layers of property and transaction law that can vary across the country means that the market is not one instantly attracting the smaller property investor who can add dynamism, confidence, security and diversity to a property market.

However – it’s clearly the case that there is massive room for expansion and profit in the real estate market in India.  Just one example of this fact is that India will be hosting the Commonwealth Games in 2010 but it has yet to build or even plan all of the accommodation needed to house the expected tens of thousands of visitors, competitors and associated persons – in fact India only has an estimated 12,000 quality hotel rooms!  There is also pressure for the development of both high and basic grade accommodation, retail space, industrial, warehousing and office space and it’s the larger institutional investors such as Morgan Stanley or Lehman Brothers and Merrill Lynch who are positioning themselves to cash in on the property boom.

While the Indian government worries about whether the Indian property market will boom and grow out of control and attempts to control it by restricting the smaller investor through taxation and legislation clamp downs, it is actually the larger, faceless, corporate investors who will profit and ultimately exert greater control over the fate of India’s real estate market and that is not necessarily a good thing.  Hopefully in the future the Indian government will allow their property market to be accessed, influenced and enjoyed by a whole range of investors and it will benefit accordingly…until then we’ll watch and see how it develops.

Special Reports: Property News for India

India Real Estate Investment Overview
India's property market has unparalleled room for expansion and real estate investment into India is now beginning to boom

India Investment Real Estate Buying Guide
India's investment real estate market is beginning to boom and return impressive profits, but the sector remains restrictive for investors

India: A Real Estate Investor’s Country Guide
International real estate investors examining India for property investment opportunity are discovering inimitable profit and growth potential.