LOOK BACK 2016
Realty reset for the end-user in Punjab
The value of housing as an investment asset declined as the end-user replaced the realty investor as the demand mainstay in the state. Home prices declined across the state , for the fifth year, making it cheaper for the enduser to enter the market and unattractive for the investor to earn returns. The builder focus on the budget and affordable housing also increasingly became the norm as builders tried to tap into the end-user demand in these price segments.
Protecting the home buyer - RERA
The real potential gamechanger for end-users came in the form of the the Real Estate (Regulation and Development) Act ,2016. The law and the consequent formation of the Real Estate Regulatory Authority (RERA) in each state gave a flip to the home buyer. The housing sector, hitherto considered the most unregulated, is set for a change with the enactment of this Act.
Though the state rules under the law and RERA are yet to be formed and notified, these have to be operational by April 2017, as per the Act. The state government recently circulated the draft rules.
“Home buyers in the state have for long struggled against the builder’s failure to deliver on timely possession and infrastructure. Consumer court and criminal cases against builders pile up as realty buyers feel cheated. RERA is expected to bring in accountability and transparency in the realty sector,” says Parveen Goel, 33, a businessman and home buyer in Patiala.
Some of the salient features of the Act include: Standardisation in the sector with uniform definitions of realty aspects; registration of all projects with RERA, prior to sale, by the developer; 70% of the proceeds from the sale of apartments in a project to be kept in separate account to be used solely for it; developers can’t give misleading advertisements, booking amount cannot be more than 10% of the total price of the property, punitive provisions include project de-registration and penalties in case of contravention of the provisions of the Act or the orders of the authority or the tribunal, and the Act also stipulates imprisonment for term that may extend to three years, or a penalty which may extend to 10% of the estimated cost of the real estate project, or with both.
Illegal colonies’ regularisation
For regularisation of illegal colonies and plots under the local bodies, the state government has given a month from December 15, 2016 to January 15, 2017. The Punjab Government notified the policy for compounding and regularising unauthorised colonies and plots falling in colonies under provisions of the Punjab Laws (special provisions) Act, 2013.
The policy first came in 2013, and was then extended in 2014. But the problem persists. For instance, in Ludhiana, colonisers of 1,200 unauthorised colonies submitted applications with Greater Ludhiana Area Development Authority (GLADA) for regularisation. Only 60 were granted approval. Around 1,000 applications were rejected. In Jalandhar, only 200 applications were received for regularising colonies, while there are 330 illegal colonies in the city. “The policy hasn’t solved the issue of illegal colonies. It has only compounded problems. A one month’s extension in the policy is unlikely to help that also just before the assembly elections. There should be a holistic and realistic approach towards this issue,” says Anil Chopra, 64, chairman of the Confederation of Real Estate Developers’ Associations of India (CREDAI), Punjab.
Demonetisation and state realty
Like the housing sector in the rest of the country, the state’s realty too got a jolt after the central government’s decision to ban high-denomination currency notes. Unlike the state capital, Chandigarh, where the difference between the collector rate and market price varied by 20%, this difference is larger in Punjab. “The collector rates in some locations are even less than 50% of the market prices. As there is a large difference between collector rate and prices, it means the cash component in realty deals is larger in the state than Chandigarh. Prices are expected to fall sharply, and home sales have already started to decline. Deals aren’t taking place,” says Atul Dhingra, 37, a Ludhianabased realtor.
Price, demand, supply trends
Home prices in major cities of the state recorded corrections. The price fall varied between 20% and 50%, depending on the location. Demand levels were low and most of it was generated by the end-user. There were negligible new project launches in the state. Most developers struggled with high unsold inventory and liquidity crunch leaving them in no position to further add to supply. Additional supply was primarily restricted to the budget and affordable segments.
In the industrial and financial capital of the state, Ludhiana, the realty situation marginally improved as the price correction rate slowed down, and the enduser pushed up demand. The market was driven by the enduser demand.
Deepak Badyal, 48, president of the Ludhiana Realtors Association, says, “Most of the demand was concentrated in the 50 sq yard to 100 sq yard segment. The supply for these products came f rom local builders and availability was in the periphery. Plots in the size segment are priced between
R8,000 per sq yard to R12,000 per sq yard. The price of a 50 sq yard plot varies between R3 lakh to
R4 lakh; and built-up duplex price hovers around R8 lakh. Generally, in these products, the ground floor consists of a room, kitchen and small guest area, while the second floor has two small bedrooms and a bathroom. The segment was dominated by end-user, comprising small businessmen and low income groups, with limited or no investor presence.”
Plot prices varied widely between R8,000 per sq yard and
R80,000 per sq yard, depending on property location whether in the periphery or developed inner city areas.
The realty situation in Amritsar didn’t change as compared to last year. Price corrections continued this year also though the rate of price dropped. Most buyers became wary of developers not delivering on their promises, particularly, long delays in giving possessions. Most of the local builders couldn’t meet the buyer expectations. Plots were priced between R8,000 and
R45,000 per sq yard. The Bathinda realty market saw price levels touching a fiveyear low. Investors avoided the realty market opting for other investment options, giving a higher rate of investment returns. The end-user also opted out of the market expecting prices to fall. Plot prices ranged from R5,000 to R30,000 per sq yard.
The slowdown was the norm in Jalandhar, the main city of Doaba. Like Ludhiana, budget housing and affordable segment, though, did comparatively well as the end-user in these price brackets remained active. Plots were priced between R8,000 and
R80,000 per sq yard. Demonetisation is expected to further dent the trend of price corrections. In the short and medium terms, demand and supply expansion is expected to be restrictive.