By all means, 2017 has been a turnaround year for the real estate sector. The industry saw some huge progressive developments and improvements which was needed for the enhancement of the sector. It is now clear that the industry is finally turning in to structured and organised sector. 2017 has been quite significant as the government has announced the right moves to drive growth of real estate sector. Government initiated a number of policies which will give a much needed boost if executed in the right method.
India is undergoing a rapid change now. As there is a need of approx 20 million houses the government encouraged the participation of private players to enter affordable housing to achieve ‘Housing for all’ through financial or non-financial support, government has taken a great initiative by developing the PPP model.
The ‘Housing for All’ objective requires huge investment in infrastructure, a large-scale skill development programme, and tremendous financial support, for timely implementation. Innovative and aggressive steps are required without which, the goal cannot be accomplished. Also, the cost of construction is high making it financially unfavorable for some developers.
With public private partnership (PPP) policy for affordable housing in India, we will see a reduction in land burden, financial and capital investment, maintenance and positive outcome of the capital invested. As land is the costliest commodity in real estate, models in affordable housing such as private land can be developed for intensive utilization, higher FSI or in exchange for permission to build high-end housing. The PPP model has a potential to boost affordable housing if implemented in the right direction. We will witness fast approvals and transparency in the system.
The government has increased the allocation under the PMAY scheme which will encourage homebuyers to purchase affordable houses. To make affordable housing more attractive, instead of built up area, the carpet area of 30 and 60 sq meter will be counted.
After several years of wait, Government finally designated infrastructure status to the affordable housing that is encouraging for developers as it will ensure easier access to institutional credit and help in reducing developers’ cost of borrowing for affordable projects.
This was a game-changing step for developers who already have a good presence in the affordable segment. The relaxation on timelines from 5 years to 2 years for long term capital gains, joint development agreements, tax rebates for builders will help reduce their tax liability. This might help spur consumption and also have a positive impact on demand for housing.
Government has now made it easier to buy land by providing offers to avail their own land at cheaper rates for affordable housing segment. There is a huge demand right now for this segment and supply is comparatively less especially in the city of Mumbai. At present, buying a house in city with less than 1 crore is not possible, however, affordable housing projects will change the situation.
It will not be wrong to say that the Real Estate Sector of our country has seen a lot of developments in a short span of time. While demonetisation did stump the sector for a while, RERA & GST soon gave it the strength to be up and running.
Highlighting the two biggest initiatives, RERA & GST together are stimulating the existing uncertainty in the market. It is ensuring transparency, efficiency, promote growth of buyer’s confidence and boosting investments in the real estate industry.
Genuine requirement for homes coupled with the advent of affordable housing also increased housing finance options; realty does seem likely to pick up more pace. Due to RERA, buyers and sellers are having the same type of information about the project.
Apart from RERA and the GST, additional policy initiatives such as REITs, the Benami Transaction Act, Demonetisation, are also expected to have a long term impact on the sector. With a tepid market sentiment over the last 2 years, combined with a host of new policy measures, it has never been more challenging to be a leader in real estate.
Demonetisation, Benami Property act are all steps towards increasing transparency across the real estate sector. The Benami Property Act is expected to bring greater clarity with respect to property ownership. All these measures are in the long run expected to create stable businesses and a mature industry.
Property rates still stand independent of its radical policy reforms and may witness some alteration in long term horizon .As developers have responded well to GST ad RERA, they will try certainly not to pass on any extra cost burden to the end user. Today’s market is very much stable for buyers, options are available, making it a good time to invest in a house.
Also the recent move of linking the Aadhaar with all the property transactions and enhancement in carpet area, Mhada Houses are all positive steps taken for the growth of the industry which is benefitting buyers and developers too.
The Indian real estate market is expected to touch $ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the country’s Gross Domestic Product (GDP).The market size of the real estate sector is anticipated to grow at a compound annual growth rate (CAGR) of 11.2 per cent in the financial year 2008 to 2020. Commercial real estate, retail, hospitality are growing considerably, proving much needed infrastructure for India’s growing needs.
The eco system of property market in Indian real estate is much better now as the economy is showing sign of improvement with stringent act that is thus leading to higher buyer’s sentiments. From the inventory standpoint, developers are sitting over quality inventory which will make the wishes of the home buyers for a ready-to-move in flats come true.
The positive and brighter outlook for the year of 2018 comes from the innovative reforms that took place in the real estate sector in the year of 2017. Buyer confidence is at its peak right now and these measures have seen the nation jump 30 spots, being ranked 100 in the World Bank’s global ease of doing business 2018 rankings. This will make India an investment hotbed in 2018.
(Views expressed in this article are of Manju Yagnik, Vice-chairperson of Nahar Group)