How RERA and GST con­trib­uted in pulling down home loan growth?

GROWTH DE­CLINE Home loan growth in April­Oc­to­ber fell 32.7% from a year ago, one of the big­gest de­clines in the last five years

Hindustan Times (Chandigarh) - Estates - - HT ESTATES - Bidya Sa­pam n

MUM­BAI: Home loan in­ter­est rates have dipped, but buy­ers’ sen­ti­ments have not im­proved, data shows, lead­ing to a sharp fall in home loan growth.

Home loan growth in April-Oc­to­ber fell 32.7% from a year ago, one of the big­gest de­clines in the last five years, data from the Cen­tre for Mon­i­tor­ing In­dian Econ­omy (CMIE) showed. In the same pe­riod in 2016, home loan growth was down 4.27%, while in 2015, it was up 26.89%.

Slow im­ple­men­ta­tion of the new realestate reg­u­la­tion across the coun­try as well as un­cer­tainty over the im­pact of good and ser­vices tax (GST) on home prices have pulled down con­sumer sen­ti­ment in the last one year, said real estate con­sul­tants and de­vel­op­ers.

In May this year, the new Real Estate (Reg­u­la­tion and Devel­op­ment) Act took ef­fect.

Be­sides, the first few months of this fi­nan­cial year saw the lin­ger­ing ef­fects of de­mon­eti­sa­tion which had im­pacted the over­all mar­ket both at the sup­ply and de­mand ends, they said.

The de­cline in home loan growth comes at a time when in­ter­est rates have been fall­ing. In the last two years, home loan rates have come down by 150-200 ba­sis points. A ba­sis point is one­hun­dredth of a per­cent­age point.

“Three events have slowed down the real estate mar­ket in the last one year. First it was de­mon­eti­sa­tion, then be­cause of RERA new launches came down dra­mat­i­cally. Thirdly, GST has in­creased the cost. All these have brought down the sen­ti­ment and as a re­sult sales have been slow,” said Anuj Puri, chair­man, Anarock Prop­erty Con­sul­tants, a real estate ad­vi­sory firm. Apart from few states like Ma­ha­rash­tra, Gu­jarat and Ra­jasthan, most oth­ers are yet to im­ple­ment the new reg­u­la­tions, cre­at­ing a lot of un­cer­tainty in the minds of con­sumers. Most cus­tomers are wait­ing for RERA-ap­proved projects, he added.

Ashutosh-Kha­juria, ex­ec­u­tive di­rec­tor, Fed­eral Bank Ltd, also agreed that R ERA and G ST have slowed down the over­all home loan in­dus­try. “Con­sumers will take time to get used to the new (tax) rates due to GST. They will take time to sink in...There is a tem­po­rary blip. I think from next fi­nan­cial year it should get bet­ter,” he said.

Un­der the new tax struc­ture, buy­ing un­der-con­struc­tion prop­er­ties at­tracts a net ef­fec­tive rate of 12% as against the ear­lier rate of around 5.5% (in­clud­ing value-added tax and ser­vice tax).

Hit by de­mon­eti­sa­tion, home sales dipped by 41% in the Oc­to­ber to De­cem­ber pe­riod last year across eight ma­jor cities as com­pared to the same pe­riod the pre­vi­ous year, while launches fell an even sharper by 61%, as per data from prop­erty con­sul­tant firm Knight Frank. How­ever, sales started pick­ing up by the first quar­ter of this fi­nan­cial year.

Ac­cord­ing to Li­ases Fo­ras, an­other prop­erty ad­vi­sory firm, homes sales grew by 6% in the June quar­ter over the pre­ced­ing three months.

“The first six months of the year were slow. How­ever, we are see­ing a huge pick-up since Septem­ber. We have see­ing a great come­back and the num­bers will im­prove as we go into the next year,” said Bo­man Irani, vi­cepres­i­dent, Con­fed­er­a­tion of Real Estate De­vel­op­ers As­so­ci­a­tion of In­dia (Credai), a real estate body. Irani, who is also chair­man and man­ag­ing di­rec­tor of Mum­baibased Key­stone Re­al­tors Pvt. Ltd, said the con­fu­sion over RERA has set­tled down in Ma­ha­rash­tra and this will help im­prove con­sumer sen­ti­ment by next year.

“Real estate mar­ket has been down even be­fore RERA came in... De­mand for af­ford­able hous­ing is there but the pickup is slow. Peo­ple may have ap­plied for some of the af­ford­able hous­ing schemes and are still wait­ing,” said Pritesh Bumb, an­a­lyst, Prab­hu­das Lil­lad­her, a Mum­baibased bro­ker­age firm.


Un­der the new tax struc­ture, buy­ing un­der­con­struc­tion prop­er­ties at­tracts a net ef­fec­tive rate of 12%

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