The various steps taken by the Centre including the introduction of Real Estate Regulation Act (RERA) and the Goods and Services Tax (GST) along with Real Estate Investment Trusts (REITs) will help improve transparency in the long run and thus increase investor confidence in the real estate sector, Anshuman Magazine, Chairman, India and South East Asia, CBRE, said in an interview. While 2017 would be the year of consolidation, the sector’s growth prospects for 2018 would be ‘brighter than ever’ as the impact of the regulations would unfold throughout this year. Edited excerpts:
You have been active in the Indian real estate sector for over two decades, what are the radical changes you have witnessed and how do you evaluate them?
Recent government initiatives including RERA, GST and demonetisation have all been positive steps towards increasing transparency and boosting consumer confidence in the real estate market. With the overall market moving towards ease of doing business, we can expect potential investors to relook at the market for investment opportunities.
We believe that the long term market dynamics for the sector will remain positive, especially in the residential market.
With RERA being implemented, developers are likely to focus on timely delivery of ongoing projects and also remain increasingly flexible on pricing and payment structures. This will help increase activity.
The government has increased allocation under the Pradhan Mantri Awas Yojana scheme. This will not only encourage home buyers to invest but also encourage participation from private players to launch projects in this segment.
What will be the impact of thevarious government initiatives?
2017 is expected to be a year of consolidation — with the results of all policy initiatives taken in 2016 beginning to take shape. Most of the steps are aimed at improving transparency and improving overall investor sentiment. The passage of the Real Estate Regulation Act was the most significant reform that the real estate sector has seen in the recent times. Once implemented in the right spirit, it will not only help regulate the sector and promote transparency, but could also facilitate greater volumes of domestic as well as overseas investment flows. The confidence of home buyers is also likely to revive.
The government has taken yet another step to improve transparency and accountability in the sector with amendments to the Benami Transactions Act 1988; with the new act coming into force from November 1, 2016. As the impact of these regulations unfolds in 2017, the sector’s future growth prospects in 2018 look brighter than ever.
Analysts believe consolidationis likely to happen with RERA coming into force. What is your perspective?
Post RERA, we expect the real estate market to be much more transparent and investor friendly. RERA has been created to ensure accountability towards the buyer and developers, protect consumer’s interests, ensure fair play and reduce frauds and delays. Another objective of the act is to instil transparency in the sector which is needed for the overall improvement in investor confidence and to encourage greater institutional capital inflows into the sector. The bill is likely to add to buyer confidence as they are expected to feel more in control/aware of any changes in their project. With RERA being implemented across the states, developers are likely to focus on the timely delivery of their ongoing projects and also remain increasingly flexible on pricing and payment structures.
Consolidation is also on the cards as smaller developers are expected to enter into collaborations and joint developments with prominent players. Project delays, changes in project layout/plans without the consent of the owners are expected to stop. Mandatory online submission of requisite documents is likely to streamline the approval process. Complete information disclosure will be another benefit as developers will have to disclose project information such as details of the promoter, plan of development work, land status, status of statutory approvals, names and addresses of real estate agents, contractors, architects, and structural engineers, among other details.
What is the impact of demonetisation seen till date, and how will it pan out in the long-term?
The country witnessed what was expected — a short-term shock; however, the economy is already on its way to absorb the impact of the move. Consumption/sales across sectors that had seen a relative dip in the immediate months post demonetisation, are already picking up at an expected pace, mainly due to the smooth remonetisation process adopted by the government. The real estate industry was already moving towards increased transparency and governance, with demonetisation being another step in the same direction. Several steps taken by the government combined with this announcement, will further improve transparency and increase investor confidence in the real estate market in the long run. The outlook is positive for 2017; residential supply jumped by 70% q-o-q in Q1 2017. Compared to only 18,000 units launched in Q4 2016, we have seen more than 30,000 units launched in Q1. Housing sales jumped by 80% q-o-q in Q1 2017. Compared to only 14,000 units sold in Q4 2016, we have seen more than 23,000 units sold in Q1.
The centre hadannouncedseveral sops for affordable housing. How beneficial would they be?
While it is too early to gauge the overall impact that these incentives will have on the market, there is no doubt that in the long term, the affordable housing segment is expected to see positive traction. With private developers incentivised to enter into this segment, we can expect renewed activity in the affordable housing segment and fresh supply to start entering the market soon.
Where are residential real estate prices headed?
Residential prices will remain mostly stable over the coming few months. Over the past couple of months, there hasn’t been a significant dip in prices as far as the primary market is concerned, as was being expected; however, there has been some rationalisation in the secondary market. However, sales and new launches have improved in Q1, vis-a-vis Q4 ’16, and there is an overall recovery in sight.
