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2017, The year of reforms for Indian real estate sector

real estate sector

by Santosh Sinha,

Often underrated, the Indian real estate sector, for the first time, experienced a much-awaited limelight in the year 2017. Starting from the Demonetisation and going ahead with reformatory measures like RERA, GST, Benami Properties Act, and then the proposal to link Aadhaar with property deals, the sector got impacted by the government’s several policy decisions and reformatory measures; some of them went in the favour of the developers, some made them fall in line. Overall, in totality, the Indian real estate sector, indeed,  got benefitted.

As per Mr. Harinder Dhillon, VP-Sales, DLF, it is now the right time to invest into the sector. He said, “The year 2017 can be regarded as a watershed year for the real estate sector due to the implementation of RERA and Goods and Services Tax. The forthcoming year is the perfect time to invest in real estate sector as these legislations have heralded transparency and accountability into the sector. Home loan rates, too are at an all-time low and are expected to remain low in the near future as well. This implies considerable savings in the EMI costs that will enable homebuyer’s to avail low-cost home finance and fulfil their dream of owning a home.”

Though, many experts believe there were more misses than hits and the market could have performed better with a planned ‘on-ground’ execution of these reforms.

Excellent Policies, Weak On-Ground Activation

Mr. Yatin Sharma, COO, REMAX said if these policies could have been executed well, the market could have behaved in a better way. He said, “Let’s pick RERA which is only notified across 18 states out of the 29 and this almost 8 months since it was announced. While the govt’s intent to regulate the market is appreciable but if the execution is sublime it would add more meaning to ‘customer confidence & security’ in the troughed residential real estate.”

Mr. Ram Walase, MD & CEO- VBHC is of the opinion that the market would take another 2-3 years to adjust to these reforms. He said, “It has been a year of disruptions for the real estate – demonetisation, RERA, and GST. The industry is yet to fully recover from the short-term effects of the reform measures. It would take about 18-24 months for the industry to recover from the effects of inventory overhang and regulatory interventions. Yet these disruptions are likely to drive the long-term metamorphosis of the sector

The reforms will help organize the market

However, there are other experts who feel these reforms have definitely helped the market consolidate and have brought better transparency into the sector.

Mr. Khushru Jijina, MD, Piramal Finance & Piramal Housing Finance Ltd. said, “The benefits of RERA are reduced project delays and protection for homebuyers. A major positive from the Act is that, it has forced real estate players to become more transparent in their business, especially planning and pricing as well as better execution and timely delivery. The Act has also increased investment into the sector with capital flowing into multiple segments including residential and commercial as well as warehousing and logistics. ”

Vinod Rohira, Managing Director and CEO, Commercial Real Estate & REIT, K Raheja Corp, further opines, “India has witnessed an acceleration of economic growth in 2017, and we are optimistic about its future potential. The business environment in the country is positive and has gathered positive momentum. The impact of all the regulatory policies that came into play in 2017 will continue to unfold in 2018, strengthening corporate governance and further infusing transparency into the system, making the Indian economy progressive and robust. We will see a lot more organised offerings going forward, in all segments of real estate which will fasten the process of decision making for consumers with less ambiguity and perceived risk which will ultimately increase the velocity of sale and create a healthy environment for real estate markets. The spirit of RERA is in the best interest of consumers, they can hand-hold the process with developers for faster approvals, more clarity in terms of legislative impact. ”

Ms. Manju Yagnik, Vice-Chairperson, Nahar Group, feels that the year 2017 is remarkable in achieving government’s ‘Housing for All’ ambition. She said, “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. Apart from RERA and the GST, additional policy initiatives such as REITs, The Benami Transaction Act, Demonetization, are also expected to have a long-term impact on the sector. The Benami Property Act is expected to bring greater clarity with respect to property ownership. 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 US$ 180 billion by 2020.”

RERA brings a new era of transparency in real estate

Mr. R K Arora, Chairman, Supertech Limited rightly put forward his perspective about RERA and its impact on the sector. He said, ” RERA promised a new era of transparency and professionalism in the realty industry. RERA promises to address the biggest issue concerning buyers – that of timely delivery of their homes and other properties. Further, the grant of Infrastructure status to affordable housing was a great move for the sector. The government also announced Credit Linked Subsidy Scheme (CLSS) during the year, thereby making loans available at much affordable rates, thereby benefiting both buyers and developers community. Under the scheme, interest subsidy is credited upfront to the loan account of beneficiaries through lending Institutions resulting in reduced effective housing loan and equated monthly installments”.

Mr. Ravish Kapoor, Director, Elan Group said, “By introducing regulations like RERA, Benami Transaction Prohibition, REITS, GST there is a long-term industrial growth and it also impacts on ease of business by transparency at work. On the demand side, the office space requirements of sectors such as manufacturing, logistics, FMCG, etc., showed positive signs, and we expect this to continue in the coming time ahead. Many malls which were to be completed in 2017 were completed in the year and many malls are to be developed in coming time. We believe that the Indian real estate sector will emerge stronger, healthier and capable of long periods.”

Foundation laid, it’s time now to move ahead

With so many reforms announced and executed by the government, the sector seems a bit organized, as compared to the preceding years. Will the enthusiasm carry forward to the next year!

Mr. Pankaj Bansal, Director, M3M Group said, “With improved ease of doing business rankings, enhanced political stability & economy expected to regain its momentum, the overall investment climate in India is expected to substantially improve in 2018. Interest rates have already moderated and are expected to come down further making the cost of borrowing cheaper for buyers as well as developers. Given all these factors, we believe the outlook for Real Estate for the year 2018 is positive and it will be a good time to invest in real estate.”

Vineet Relia, Managing Director, SARE Homes said, “The coming year will hopefully be positive for the sector. An increase in sales and decline in unsold inventory is expected. 2018 may witness new launches as well but most of the developers will focus on completing their under construction projects. Moreover, there is need for more clarity on GST leading to better transparency in the sector.”

Echoing similar thoughts, Mr. Gaurav Mittal, MD, CHD Developers Ltd. said, “With the overall market moving towards ease of doing business, we can expect potential buyers(end users) to relook at the market for investment opportunities. Having less project launches and uniform absorption will leads to increase in demand hence, improving sector in coming year. Also, 2018 will be the year of affordable housing. Since the market is consumer friendly, buyers will tend to invest in affordable housing segment owing to great options at affordable prices and good investment returns with time bound possession.”

Indeed, the foundation has been laid, there are much talks about the revival of transparency into the sector and the improved buyers’ sentiments. The year 2017 has definitely set the platform for a ‘demand-oriented’ organized real estate sector. It will be, therefore, interesting to see how the developers align themselves to match the much-revived buyers’ sentiments. The year 2018, therefore, becomes even more important for the real estate and infrastructure sector.

A communication professional with more than 12 years of experience in real estate domain, Santosh Sinha has observed minutely every move of the sector so far. A strategist by profession, a writer by nature, Santosh Sinha loves to pen his thoughts, thereby allowing his readers to understand the nitty-gritties of Real Estate and get benefited out of it.

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