Building on game-changing reforms

2017 will be remembered for bringing in key reforms in the real estate sector. For starters, the Government made it loud and clear that home buyers will no longer be at the mercy of real-estate developers.

Key policy reforms such as introduction of GST, the Real Estate (Regulation and Development) Act, 2016 (RERA) and the Union Budget putting development of affordable housing on priority did create lot of stir in the developer community and consumers alike. In spite of all these measures, the real estate inventory is still on slow wicket. Industry watchers note that 2018 will be a year for fence-sitting buyers as reforms are likely to boost consumer sentiments.

“While demonetisation translated into a reservation among prospective buyers to part with their cash reserves, RERA and GST affected the supply side. However, these reforms have had a positive impact as well, the fruits of which will ripen in the coming year,” said Anand Piramal, Executive Director, Piramal Group and Founder, Piramal Realty.

Anuj Puri, Chairman, Anarock Property Consultants, echoed the same sentiment. “Real estate sector got more than its usual share of the limelight. A series of reforms and structural changes tore into the very heart of the industry, effecting a surgical strike at market capacity, unaccounted funds transactions and customer victimisation.”

Puri points out that in 2017, new housing project launches were severely impacted by the triple tsunami of demonetisation, RERA and GST. As per Anarock research, only 94,000 units were added in top 7 cities between Q1 and Q3 2017, which is a drop of more than 50 per cent from the same period in 2016.

Gautam Chatterjee, Chairman, Maharashtra Real Estate Regulatory Authority, said, “A big brother (regulator) watching over is giving lot of comfort to financiers, consumers and developers. As regulator, our immediate priority is to ensure that delayed projects are executed on time.”

In post-RERA era, the direction for developers was clearly on execution.

Ashok Mohanani, Chairman, Ekta World and V-P, NAREDCO West, said, “Reform has boosted consumers’ confidence and has bought transparency in the industry. While real estate investment trusts (REITs) did not do much as anticipated this year, affordably priced units have seen higher absorption in most cities. The real estate sector registered around 15-20 per cent growth in sales in September- October and 13-15 per cent during May- July.” Additionally, Finance Minister Arun Jaitley announced relief from notional tax on unsold flats of developers. This decision will now begin in only one year after project completion.

Real Estate Outlook for 2018

Ashwini Kumar Hooda, DMD, Indiabulls Housing Finance Ltd, said: “2018 will see a huge growth in home purchase transactions in the ₹25-50 lakh bracket, spurred by the reforms introduced in 2017 and its varied benefits being passed on to the middle income categories. This past year we saw interest rates drop by 0.75 per cent to 8.35 per cent. Property prices have remained stable in 2017, which has also enhanced affordability to 2.8 times annual income, compared to 4-5 times in developed countries. Larger developers are entering the affordable house space due to tax concessions from the government and hence quality supply should match the huge demand”.Vinod Rohira, MD and CEO, Commercial Real Estate & REIT, K Raheja Corp, said:“The next 12-18 months will see speculative supply and paper supply diminish and real supply emerge. The real supply in the short term will be far lesser than it used to be, and with the strengthening of demand we will see prices firming up because lesser real value quality residential supply will be available when the consumers want to finally buy. On the commercial front, it has been robust, steady and will continue to see the same trend in the next 12-18 months. With sufficient boost from the government, the realty market is expected to see good times ahead.”

Additionally, consolidations and joint developments will see a rise and the sector will be left with credible brands leading to higher consumer confidence. Co-working spaces are also expected to see a spike in demand in the coming years as they are becoming platforms for collaboration, exchange of ideas and higher networking opportunities. REITs too are expected to take shape, says industry players.