By PARESH
KARIA, Chartered Accountant
We are in
the midst of the most exciting and path-breaking elections our country has ever
seen.The entire nation is gripped by the election fever.There is a lot of
enthusiasm,especially among the young and first-time voters,which is getting
reflected in the higher voter turnout in the voting done so far.Others are looking
forward to cast their votes in the days to come.
Everyone
is eagerly waiting for the day - for May 16, the day on which the results will
be announced and the future of our country will take a new course.
While the
opinion polls announced show a clear majority for one party,we will have to
wait till the actual results are announced to see what type of government we
will have at the centre.
Assuming,
we have a stable and a growth oriented government,let us now examine the state
of the real estate market,post the elections.
SHORT -
TERM..
The stock
market has already appreciated by 10% in the last two months in anticipation of
a growth-oriented and market-friendly government.
When the
actual results are announced and a stable government is formed,the overall
market sentiments as well as the confidence level of the people at large,in the
economy, will get tremendous boost and there could be a spike in the stock
market indices.
This will
have an immediate impact on the real estate market as well. The developers are
likely to take advantage of improved market sentiments and announce a hike of
5% to 10% in prices.
Since the
sales have been stagnant,this may further create a scenario that now with an
improved economic outlook,the prices will rise further and those waiting on the
sidelines would rush in to buy a property. It needs to be seen whether the
property buyers will fall for the bait or / hold on to their buying decision
for some more time till the initial euphoria is over.
MEDIUM -
TERM..
Due to an
improved economic environment and confidence level, it is believed that more
people will come forward to buy property. Also,due to increased job security,
more people would be willing to take a house loan for buying a property.
Further, those in businesses and senior management corporate employees, would
also look at buying second houses.
More
importantly, investors would return back to the market and those who have made
gains in the stock market, would be looking at deploying whole or / part of
their profits in the real estate sector. Thus, in the mediumterm, the property
prices should go up, especially in investor-driven markets such as Mumbai and
the NCR.
LONG -
TERM..
The real
estate industry is currently going through trying times.The keyproblems faced
by the industry are:
Non
availability of finance/high cost of finance.
Delay in
approvals..
Inconsistent
and impractical policies.
According
to an estimate, the above factors contribute to cost escalations of 30% to 40%.
Due to the inaction of the current government, a number of policy measures
& reforms in the real estate sector are held up, thereby, harming the
interest of the industry players as well as property buyers.
The new
government is expected to take quick policy measures and introduce reforms to
address the above problems plaguing the real estate industry, thereby, giving
it a new lease of life.
Some of
the policy initiatives expected from the new government are:
*
Streamlining the process of approvals leading to faster approvals.This could be
achieved through a single window clearance system,a long pending industry
demand.
* Giving an industry/infrastructure status to
the real estate industry,thereby,enabling to raise funds with ease and at
competitive rates.
*
Liberalising FDI investment in real estate which will also make more funds
available.
*
Clearing the impediments in the way of introducing REITS.
* Introduction of a real estate regulator to
protect the interest of property buyers.
*
Changes in the Land Acquisition Bill to make it easier to acquire land
for development.
Apart
from above policy measures,the new government is likely to take some major
initiatives in the areas of affordable housing and urbanisation.Its focus on
infrastructure,especially transport,will ensure availability of more habitable
areas for development of houses which in turn,will lead to an increase in
supply of housing stock.Thus,in the long term,the above measures will result in
a vibrant real estate sector with better infrastructure and connectivity.
The
writer is a chartered accountant with over 15 years of experience in
banking, financial services and real estate
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