2018 looks encouraging for Real Estate developers: Rohit Poddar

The Government had announced the demonetisation of Rs 1,000 and Rs 500 currency notes on 8th November 2016. This was landmark steps that arrived at wiping out unaccounted money from circulation and reduce tax evasion. Due to this, the sales of residential units were impacted in first three months of 2017.

During this period investors with white money had also adopted a policy of wait and watch expecting decrease in the process.

At Poddar housing, we were insulated from this situation because of two primary reason, our policy of accepting full cheque payment and the fact that we were targeting predominately the Economically Weaker Section(EWS), middle income group 9 MIG) since we cater to affordable home segments.

The two other significant developments in 2017 were GST rollout and implementation of RERA. Realty players faced challenges to align their business to comply with the GST guidelines.

On the commercial front, since GST was applicable on purchase of homes and under construction projects, homebuyers were neither opting for completed project nor putting their purchase decision on hold. Theses combined factors led to decline in sales at 4.8 per cent in quarter three of 2017 in five of top seven cities. Some developers were therefore seen offering higher discounts to buyers. New launches in 2017 were also at a slower pace as developers were assessing market sentiment post RERA era.

RERA has completely changed the landscape of the real estate sector. These will results into a kind of correction in the real estate sphere.  Where only a few organised players will consolidate the sector and unscrupulous players will be eliminated.

India needs 25 million homes in the affordable category. The interest subsidy under the credit linked subsidy scheme of Pradhan Mantri Awas Yojana ( PMAY) will play a major role in providing homes to economically weaker section and middle income group home buyers that to in an inclusive approach within the formal banking system.

In 2018, the demonetisation impact that has started to take off will see a further southward movement which will be an encouraging business solution to be in for the developers.

The higher transparency on account of RERA and further consolidation is a good sign to boost confidence of small investor who now have an options of in investing in real estate investment Trust (REIT’S) and facilitate greater volumes of foreign investments flows.

If there is a drop in home loan interest rates then naturally this will lead to increase in the home loan disbursement. Meanwhile the regulators for housing finance companies, national housing banks and other industry related to real estate associations have written to the government authority to lower the effective GST rate for affordable housing project. This move will lead to improvement in demand for under construction homes.

The state government of Maharashtra is planning to bring in special law and change the existing rules to make the process of slum redevelopment easy. A special cell is about to be created to address the slum dwellers who oppose or delay the scheme. This will play a major role in creation of slum free city.

The real estate industry has been demanding a single window clearance scheme for all affordable housing projects under PMAY. In a business format of affordable housing where all developer operates on wafer –thin margin, the delay in approval is a major block. We really hope that a single window solution is provided with top priority.

(Views expressed in this article are of Rohit Poddar, Managing Director, Poddar housing and Development Ltd)