Martin Armstrong writes a very interesting phenomenon happening in west where govt are looking at reasons to increase Taxes because they are bankrupt and what better assets to tax than real estate because it is easy to tax immovable property.
India has also seen a residential boom which contributed significantly to tax revenues of state government. Already high value property registrations have come down significantly across states and this will lead to higher deficits for the state govt budgets. This in turn will lead to rising property taxes as it is easier to tax something which is immovable.
Martin concludes “This is why I rank property in the last category for investment. It should NEVER be everything. The population of Rome collapsed from 180AD because taxes kept rising and people were just forced to walk away. History does repeat so caution is advisable with real estate. We need a place to call home. It should not be 100% of your assets. It should be limited to a portion of your portfolio that you can afford to walk away from and survive.”
Don’t you think REITs will provide a great boost to real estate companies?
REITS will institutionalise this opaque industry. The problem with real estate is affordability and use of cash for transaction. The one often ignored part in real estate was constant depreciation of Indian rupee which made Indian real estate cheap for our NRI buyers. Lower inflation leads to stable currency which makes it unattractive for NRI’s. Lower inflation leads to lower capital appreciation for real estate investors, hence two of the big buyers will find real estate unattractive which in turn leads to lower property registrations and hence lower revenues for state govt. This will lead to rising taxes to fund their budgets and what better asset to tax than immovable property.
Yes, however recent Income Tax provisions prevent cash transactions, and inflation is on the rise again, this provides good conditions for real estate market growth.
i think for lot of mid size and marginal builders having cash removed from system is bad for their business and an inflation of 4-5 percent is not high enough to created speculative demand for mid to high end real estate. increase in credit demand to double digit or high fiscal deficit is an ideal condition for revival of real estate market and both these factors are currently missing