Residential
Real Estate Poised for Revival in Festive Season 2017
by Mr. Anuj
Puri, Anarock Property Consultants
Every
year, the end of August ushers in the beginning of festive season in India.
Religious sentiments lead innumerable Indians to plan important purchases and
investments – including real estate - during this period. Naturally, developers
also plan for these months well ahead of their arrival with a view to cash in
on this positive sentiment.
Unfortunately,
last year’s festive season did not meet their expectations as buyers stayed
away from the market - primarily due to execution delays, an uncertain economic
scenario and unattractively high prices. Demonetization also played a key part
in the depressed sentiment – not only in the resale market as was at first
expected, but in primary sales as well.
Most
aspiring home buyers deferred their purchase decisions, preferring to wait
until RERA kicked in fully. Though most developers offered compelling discounts
and schemes, buyers stuck to their cautious approach during the last festive
season.
However,
the 2017 festive season has started on an altogether different and far more
positive note. While structural reforms by ways of RERA and GST have helped
firm up buyer sentiment, developers too have progressively adjusted their
business approach in the new era of transparency brought on by GST and RERA,
and are geared up to cater to the pent-up demand for homes this year.
These
reforms, coupled with various other progressive measures initiated by the
Government, have certainly made a big difference for the realty market in this
festive season:
1. RERA and GST address the
core issue of transparency..!
The Government has passed slew of policies and reforms,
most importantly the long-awaited Real Estate Regulation and Development (RERA)
Act, Goods and Services Tax (GST) and the Benami Properties Act.
The overall
objectives of RERA are to improve transparency and accountability in the
hitherto trust-starved realty sector, protect the interests of home buyers and
ensure timely delivery of projects.
On its part, GST has
replaced the multiple taxes levied by the Central and State Governments, and
has effectively been subsumed of all indirect taxes. The improved mechanism of
input tax credit (ITC) may well soften the overall impact of taxes on real
estate.
2. Affordable housing leads
the way..!
Housing for all by 2022,
the flagship program of the NDA Government, was given a major boost when Union
Budget 2017-18 accorded it infrastructure status. Infrastructure status will
not only help developers to raise funds at a cheaper rate, but also encourage
long-term funds from institutions such as insurers and pension funds to invest
in this segment.
Taking a realistic view,
the Government has extended the deadline for completion period of affordable
housing projects to five years from the earlier three years. To boost demand,
the Government has introduced attractive interest subsidies on home loans - up
to 3% and 4% on home loans of Rs. 9 lakhs and Rs. 12 lakhs
respectively - under the Pradhan Mantri Awas Yojna.
Since the affordable
housing sector is the most incentivized segment for both developers and end
users, developers are today significantly more inclined towards affordable
housing projects.
Many reputed developers are now launching projects in the
affordable segment. In 1st half of 2017, more than 70% of new launches were of
projects with units priced in the Rs. 50 lakh budget range, which is in
sync with what most Indian home buyers are looking for.
3. Rebooted economic
environment..!
With inflation under
control and GDP expected to grow at more than 6%, the economy is in a much
better shape this year than it was in the last festive season, which was
heavily impacted by the unexpected announcement of demonetization.
Buoyed by a
stable economy and progressive policies, the realty sector attracted $1990
million in institutional investments during the first half of 2017. The
residential sector accounted for 54% ($1075 million) of these investments. The
renewed interest of institutional investors in this sector underscores the
long-term prospects of the residential sector – a fact that industry observers
as well as home buyers have duly taken note of, as well.
4. Ample availability of
ready-to-move-in supply..!
Post RERA implementation, developers are in a hurry to
finish their under-construction projects and to offload their unsold units
instead of launching new projects.
Also, ready-to-move apartments with
occupation certificates (OCs) are kept out of the ambit of the RERA and GST,
making it much easier for builders to market these products. As a result,
buyers have a wide choice of ready-to-move-in options.
There are
currently about seventy thousand ready-to-move-in unsold apartments in tier 1
cities
Also, the existence of
ready supply is ensuring that new projects launched during this festive season
are offered at very competitive rates. The attractive schemes and discounts
which reach highest saturation during the festive period are, of course, added
advantages for buyers.
5. Competitive housing loan
rates..!
Home loan interest rates
are at their lowest in the last 10 years, and will remain in that territory
owing to the generous liquidity prevalent in the market post demonetization.
Also, as they compete for bigger shares of the home loan pie, many banks have
been rolling out attractive offers like waived processing fees. This has put
home buyers in a sweet spot of an ample range of projects to choose from and
very attractive financing options at their disposal.
Summing of the festive demand boosters
- A far more
transparent and accountable real estate industry
- A plethora
of ready-to-move-in options
- Rationally
priced under-construction projects covered by the RERA assurance
- Lucrative
schemes from developers
- Competitive
home loan rates
In
short, this festive season will be different from the previous one. For
developers, this festive season could very well set the ball rolling for the
much-awaited revival for the beleaguered residential real estate.
About the author..
Mr. Anuj Puri, Chairman – Anarock Property Consultants
Arun Chitnis
Public
Relations
ANAROCK
Property Consultants Pvt. Ltd.
(Formerly
Jones Lang LaSalle Residential Pvt. Ltd.)
M
: +91 9657129999
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