by Mr. Santhosh Kumar, CEO – Operations, JLL
India
For the
common man of India, the dream to own a house will soon turn into reality with
the Mr. Narendra Modi-led NDA government taking charge.
Issues
such as affordability of real estate, delayed construction projects, delays due
to litigations surrounding real estate projects, etc. impacted developers as
well as consumers.
The new
government promises to aggressively promote affordable homes. Property is once
again going to become the most popular investment option, as there will be
significant appreciation in real estate prices on the heels of higher demand in
the coming years.
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| Santhosh Kumar, JLL India |
With the
easing of regulations, developers are expected to speed up the construction
process, providing relief to buyers who have already invested.
The big
names of the Indian industry have welcomed the new government with a hope that
it will bring the economy back on track and raise the currently plummeting GDP
(Gross Domestic Prodcuction) to 8% to 9% in the coming fiscal. The new
government at the centre is expected to infuse life in the existing policy
paralysis in the country by removing the major bottlenecks that are deterring
growth.
Revitalized
Funding Flow..
FDI in
the Indian real estate sector is expected to get a lift, resulting in
amplification of fund flows and strengthening of the battered Indian rupee.
With a clear majority triumph, the incumbent government will enjoy unwavering
stability at the centre, which will in turn encourage investors’ sentiments
with regards to the real estate market.
Global
investors are now markedly optimistic about the Indian economy, which is
expected to witness more than 100% increase in foreign investment inflows, both
via FDIs and FIIs, to above $ 6,000 Crore in the current financial year, as
compared to $ 2,900 Crore during FY 2013-14.
The urban
development ministry is expected to repeal the existing restrictions on real
estate firms by allowing foreign investment up to 49 %, free of all conditions.
This will help the real estate sector to raise foreign capital at competitive
rates and reduce stakeholder dependency on the beleaguered local financial
institutions. Foreign capital for urban renewal and slum redevelopment projects
is also expected to see major relaxations.
Boost To
The Retail Sector..
The
retail sector is also expecting significantly enhanced domestic as well as
foreign investments. India’s large but capital-constrained retailers have
welcomed the liberalised rules that are expected to bring funding and new
technologies into the sector.
As a
result, demand for retail space is going to increase enormously as more and
more domestic retailers plunge in to reap the benefits of the new policies.
Fast-Tracked
Infrastructure..
The completion of large infrastructure
projects like the DMIC (Delhi Mumbai Industrial Corridor) and the DFC
(Dedicated Freight Corridor) will be expedited. This, in turn, would mean
development of many new cities across the belt of these projects.
These
massive on-going infrastructure projects will lead to a huge demand for
warehouses, thereby giving a significant boost to warehousing and
logistics-related real estate demand. Once completed, the growth of real estate
at India’s hinterlands that will be connected by these corridors will be
exponential.
In terms
of real estate, some of the urgent steps that the NDA government needs to take
with immediate effect are:
· Reversal of the land acquisition act
· Clearance of pending receivables to
the private sector via fast-tracked bureaucratic decision-making
· Provision of fiscal stimuli to improve
industrial growth
· Creation of investment-friendly real
estate market via lowered interest rates and increased employment generation.
Further,
the real estate market expects the government and the RBI to be on the same
page with respect to checking inflation and curtailing of interest rates, so as
to revive the tumbling demand for property in India.
Developers’
Hopes..
India’s
developers are hoping that:
·
The new government will expedite the process of granting regulatory
approvals. The chronic lag in this regard has been a major obstacle for most of
their projects
· The Real Estate Development Regulation
& Development bill, which has been lingering for quite some time now, will
be passed
· The new government will ease land
acquisition parameters so that availability of land is no longer a major
constraint. Difficulties in acquiring land due to the current policies have led
to vastly escalated real estate cost.
With the
slowdown in home sales, developers have been battling a severe liquidity crunch
and a rise in their inventory levels. Many prospective buyers have abstained
from investing in property because of market negativity, an unstable government
at the centre, high inflation, high interest rates on home loans, etc.
Now, with
the stock market rocketing and the Indian rupee appreciating, these buyers are
expected to snap into action. Increased sales, along with availability of funds
from both domestic and foreign investors, will bring significant respite to
developers and finally bring an end to the liquidity crunch that they have been
facing.
The Hope
Mantra..
The three
major promises made by the NDA in their manifesto that have direct pertinence
to the real estate sector are:
(1) The development of 100 new cities
(2) Putting a new land use policy in place
(3) Planning for low-cost housing
Modi’s
pledge to implement an affordable housing policy and thereby provide homes to
every Indian family presents a $150 billion business opportunity to the sector.
The real
estate industry now also has real hopes of being granted the coveted industry
status, which will further ease fund flows.
Meanwhile,
consumers are optimistic about the impact that the new government will have on
real estate pricing, and expect a reduction in home loans, the implementation
of the proposed GST framework and the implied tax benefits to buyers.
About the author..
Mr.
Santhosh Kumar is CEO (Operations) JLL India
For media Contact
Arun
Chitnis
Head –
Corporate Communications & Media Relations
Pune
411001.
Tel:
(020) 30930441 Fax: (020) 40196101
Mob: +91
9657129999
Website:
www.joneslanglasalle.co.in
Blog:
www.joneslanglasalleblog.com/realestatecompass
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