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Impact of Seventh Pay Commission on Real Estate Sector
Finance Thursday, 3rd November 2016   Editor: Sachin Raghuvanshi

Seventh Pay Commission came into action since June 2016 and it was recommended by Justice A K Mathur to the government on Nov 19, 2015. With the implementation of 7th pay commission, the biggest beneficiaries will be automobile and real estate sector. It will give a recommended hike of 23.6 per cent in the income 47 lakh central Government Employees and 52 lakh pensioners which will also help to the State Government and the central Public Sector Unit Employees, so around 3.4 crore individuals will get the benefits. This income inflow will definitely be going to help the much needed real estate sector which was crawling for last 3-4 years.

There is a heavy burden of large unsold inventory and this surge in the income could be a game changer to this sector . There are mainly three factors due to which 7th Pay commission will directly impact the real estate sector which are :-

1)- Direct influence on the wages:- With the increment in the wages and pensions and this extra cash in the pockets is estimated to boost the real estate sector substantially . The boost in the money will lead to the boost in the investment in the residential property because there is very basic logic which always attract the people to invest in this market and that is that this a long term investment in you almost always have the chances of good returns.

2)- Demand for loans:- Banks and NBFCs will also be get benefited by this and the as the cash in hand of customers increases it will lead to increase the demand for the loans for property investment purposes, it will boost the economy and for consumers as well as the banks and NBFCs it will be a win-win situation .It is expected that with the implementation of the 7th Pay commission subsidized loans for cars will be doubled to Rs3.60 lakhs and housing loans to Rs15 lakhs which will enhance the demand in both the sectors.  

3) - FDI norms :- Restrictions on size and minimum capitalization was lifted by the government. Watching the sluggish movement of the real estate , Government’s decision to relax the Foreign Direct Investment norms in real estate is expected to play a critical role along with 7th Pay commission to boost the real estate sector .In 2007-2008 when the 6th Pay commission was launched , there was substantial boost in the real estate market and this is wat everyone is expecting again.

The implementations of this pay commission bring new hopes to the real estate sector which was crawling for last three years. Extra money in the pocket of the employees will bring fortune to this drowning sector and banks and NBFCs along with little help from FDI norms will give a helping hand to boost the sector.