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RM Reports

Real Estate Expectations from Modi 2.0 – RealtyMyths

Since Modi came to power in 2014, people discussed many decisions taken by the govt. We thought that it will be good to discuss the various decisions taken by Modi govt. from 2014 to 2019, which changed the entire landscape of real estate marketing in India. This will also set the agenda of 2019 to 2024 real estate market.

The concept of affordable housing – The first step taken by Modi govt. is the introduction of an affordable housing scheme. This scheme opened the horizon to many people who never thought that they will be able to get a flat in a metro city like Delhi, Mumbai or Bangalore. The initiative also helped many developers to explore a market which never existed.

The result

As the affordable housing got picked, the developers who were serving in the Mid and luxury segment, had to reduce their prices to compete with affordable housing players. The draught of end users further increased the pressure on investors, as they were not finding the adequate end consumers to sell their units.

The nexus was broken – The overall impact of this affordable housing scheme actually addressed the much-awaited need to the developer – investor nexus, which used to control the overall pricing demand curve for specific markets. So the market became a level field for all.

The beneficiaries – The overall impact of this was a price correction in the market in a tune of 15 to 30%.

The then market condition: In spite of the market correction, the builders were not finding the buyers in the market. As per the various reports came from the consultants like Anarock, the housing demand in India got reduced by 15 to 45%.

Reason: The distrust of buyers due to a long list of none delivered projects by many developers. The early investors or consumers were already waiting for their projects to complete, even after 6 to 9 years of delay.

The Modi govt. 1.0 Correction method

RERA: The Modi govt. in 2016 introduced a bill called RERA (Real Estate Regulations Act), the bill came as a respite to both the parties, helping build the buyer’s confidence. The RERA became effective from May 1, 2016. But it took almost 1 year to various govt. to implement it in various shapes and forms. During this phase, the real estate in India saw the first longest market slump, barring few pockets.

Insolvency Bankruptcy law 2016: The next step of Modi 1.0 govt. was the introduction of insolvency law, 2016 granting homebuyers a status of “Financial creditor” as a welcome relief to the home buyers. Which actually helped buyers to regain confidence in the real estate market

Infrastructural development: The Modi 1.0 govt. also saw that without developing the infrastructure, one can’t form the demand for the market. So, be it the Delhi-Meerut super express, or elevated road or NPR or SPR or expansion of Metro Rail to farthest end in Delhi-NCR market or Monorail, Metro Rail, Coastal road development, Mumbai Trans Harbor Link, Marine drive 2.0 in Mumbai all these developments are few examples of the Modi govt. which gave the boost to the real estate market in India

What does the report say: We conducted research to understand the overall impact of the housing demand in India from 2014 to 2019. We clearly saw a good slump in the housing demand from May 2014 to Oct 2016, then we saw that market started correcting itself and post January 2017, we have seen almost 100% growth in property demand in India. The Good news, this time we see the demands coming from all markets, it’s not only concentrated on Metros.

The beneficiary: The biggest gainer of all these exercises are the buyers. Today, the buyer feels that they are getting a good price deal to buy a house and it’s within their reach. Once, a dream of many, now becoming the reality to own a house. They are now more confident about getting their homes ready on time.

The Side effect: As we predicted in June 2015, the real estate market will see a phase of consolidation, where fly by night operators will face a lot of heat. People will lose their jobs and companies may shut. We have seen all this happening in front of our eyes. Gone are the days when gimmicks were working in the builder’s favour. Today, the buyers are doing proper due diligence before they are investing in properties.

Many business owners and workers of the market, may feel the heat of all the decisions taken by the govt., but as an insider, one knows that it all happened for the good.

The Modi 2.0 era expectations – As the market correction phase is over, the Real Estate market today has become more competitive and less profitable. It’s the time for the govt. now to work on a few financial mathematics which helps build a strong real estate market of India.

  1. The GST: The govt. should try to bring it within 8 to 10% bracket. The business community is waiting for this now. This will ease their pressure to gain some market momentum.
  1. The halted infrastructure projects: The community is seeking a speedy work for all the infrastructure announcements made by the govt.
  1. The much-needed support from local authorities in providing basic amenities like sewage, drainage and road connectivity by forming robust rules and regulations for authorities to execute. If we are tightening the system, we should cover all the stakeholders responsible.
  1. Single Window clearance: The community is seeking this for a decade now. If we are thinking to bring more FDI to this market, we have to reduce the red tape nexus of the lobby, who is gives various approvals.

Hope, that the Modi 2.0 govt. will address all these points to create a sustainable environment for all.

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