Real Estate To See Return Of Investor Confidence
March 2018

image

A report by Sotheby’s International Realty in partnership with PwC and RICS predicts that the year 2018 will prove to be a much-needed shot in the arm for the real estate sector. The initial hiccups faced by the sector owing to the implementation of various governmental reforms, including the RERA (Real Estate Regulation and Development Act) and introduction of GST, are now thing of the past and there is a newfound confidence amongst the investors pertaining to the sector. According to the findings of the report, a huge number of new end users will be added to the real estate sector this year.

A Look At The Reforms

RERA (The Real Estate Regulation & Development Act)

Benami Property Act - prohibits benami transactions and provides for confiscation of such properties

GST - only GST registered players are eligible for tax credit. Builders to pass on the benefit from input tax credit to consumers. Failing to do so could invite probe by the National Anti- Profiteering Authority

REITs - Real Estate Investment Trusts are likely to increase liquidity in the sector

Affordable Housing - Infrastructure status provided to affordable housing. 100% deduction for profits to an undertaking in housing project for flats up to 30 sq. m. in metros and 60 sq. m. in other cities

Outlook For The Real Estate Sector In 2018

The Real Estate Regulatory Authority (RERA) Act has given the buyers the right to ask builders for plan sanctions, layouts plans, and approvals from authorities, and other necessary documents. Moreover, post the implementation of RERA, only reputed builders and realty firms are capable of surviving. The rules and regulations with regards to real estate agents too have become very stringent. This has lend transparency to the selling process, further enhancing the confidence of the investors in the sector. Another positive that the sector is experiencing is that the builders are focused on completing their existing projects rather than launching new ones. Even the end users are now more interested in buying completed units rather than the under- construction ones. All these factors together will lead to lower unsold inventory and increased cash flows, both of which are positive news for real estate.

It is not hidden that black money was a major component of real estate transactions. However, post demonetization, black money was removed from the economy, including the real estate sector, resulting in fair, open dealings. The entire demonetization exercise undertaken by the Centre, supported by reforms, like RERA, GST, and Benami Property Act, is government's multi- pronged policy to create institutional and regulatory framework, towards a steady, growing economy. Real estate sector, which is a key contributor to GDP, will be benefitted from these initiatives, making it more transparent, organized and credible, attracting high consumer and investor confidence in the process.

The forecast for the real estate sector is good this year. The demand for both residential and commercial real estate is increasing. The customers today have become aspirational and this year the luxury residential market will see high demand. Branded residences, equipped with global amenities are in vogue, especially amongst the affluent consumers in the metros. Projects with super luxury brand names, such as the Trump Towers are now in major Indian cities like Mumbai, Pune, Hyderabad, Kolkata and NCR region.

Under the Pradhan Mantri Awas Yojana (PMAY), the government is providing substantial interest subsidy to home buyers. As far as residential sales are concerned, they are picking up as the interest rates on home loans have softened and the prices have become stable. As per Cushman & Wakefield data findings, the private equity investment in real estate reached INR 35,190 crore in January-September, 2017 and is likely to cross the last year's total investment figure of INR 36,590 crore.

A report by CREDAI and JLL reaffirms that India's real estate sector is projected to reach USD 180 billion by 2020, a big surge from USD 126 billion in 2015. A testimony to the fact that the transparency that real estate is experiencing owing to reforms like demonetization, RERA, GST and liberalization of FDI norms, has boosted the confidence of both Indian and foreign investors.