The real estate sector is still hurting. And the pain of fewer buyers and reduced demand — not least because of the difficulty in paying under-the-table cash — is now facing more headwinds as a result of GST.
Players in the industry, though, seem determined to look at the bright side or, at least, take it on the chin and move on.
“Demonetisation was undoubtedly a landmark event in the history of our economy,” says Surendra Hiranandani, CMD, House of Hiranandani. “While the economy was trying to pull itself out from demonetisation, confusion over the implementation of RERA [Real Estate Regulation Act] and GST caused further widespread disruption in the short term. The primary residential market, and projects undertaken by credible and reputed builders, were not affected significantly; only in projects where a cash component was involved, and those in the secondary market, have been affected.” Mr. Hiranandani says that the big positive is that transparency and accountability is now higher, making the sector more attractive for institutional investors. And for the new buyer, he says, “The influx of liquidity in the system has ensured attractive home loan rates, which are at their lowest in almost a decade, and developers have also been offering attractive rates and payment plans.”
Puneet Chandra, founder and CEO of Skootr, which supplies office space, says that the move boosted the confidence of legitimate businesses. “I feel this has turned a lot of businesses internationally very positive about India. Commercial real estate is going to be on a high during the next three to four years.” He estimates that in the co-working space alone, which his company deals in, there will be a need for three to four million desks in that time. While he concedes that the housing market faced a huge business crunch, he says that the commercial real estate benefitted from it, because “The bulk of leasing is done through white money by registered companies.” The liquidity crunch also has more benefits: “A lot of start-ups, and even MNCs, started opting for co-working and managed office working space so that they could protect themselves from the capital lock-ins which used to be very hefty.”
Demonetisation was difficult to deal with, says Manju Yagnik, vice-chairman of the Nahar Group, and it did bring sales down, but that was because potential buyers decided to wait, in the hopes that prices would drop. But he is happy about the new transparency in the sector. “It has greatly contributed in the standardisation of pricing. From a developer standpoint, it has helped us in sourcing funding from banks, and we are assured that the source of our funding is genuine.”
Knight Frank India chairman and MD Shishir Baijal says that things have come full circle. After the derecognition of high denomination currency, “Momentum in the real estate sector came to grinding halt. The festive season also passed by without bringing any cheer. The short- to medium-term impact of this new order is likely to be much more than we had expected. The findings of our latest real estate sentiment index for the quarter ending September have reinstated this late realisation.”
