RE RA, GST, REITs to usher in a new paradigm in the real estate sector
India’s domestic economy has been on the recovery curve, with the real estate and construction sector taking a leading position. Recent steps taken by the government —from the demonetisation drive and the Real Estate Regulatory Act (RERA) to the Goods and Services Tax (GST) and Real Estate Investment Trusts (REITs) — are all working towards bringing in transparency and increased investor confidence in the real estate market. India is fast emerging as an attractive investment market with positive macro-economic sentiment - government initiatives to spur investments and a developing real estate market, are all integrating to make India a positive market for attracting investors.
Underlining India’s position as a robust commercial real estate market is its appeal as an established outsourcing hub, which is expected to fuel expansion initiatives by corporate real estate occupiers from around the globe. The overall sentiment among corporate occupiers remains optimistic in recent times and the country continues to retain its healthy position in the global economy, with better growth prospects expected to support commercial real estate transactions, going forward as well.
The residential market in 2016 continued its shift from a pure, price play mechanism towards a market that is driven by commitment to delivery, quality and right pricing strategies. High price points, inventory pressures and cautious buyer approach, resulted in a muted demand in key metro cities during the year. However, recent initiatives by the government, aimed at bringing in transparency and boosting investor confidence coupled with developers restructuring their marketing strategies to attract home-buyers will hopefully help with the revival of the segment. Also, with the affordable housing segment finally getting infrastructure status, the residential market can expect to see further traction in the near future, including participation from private developers.
Effective implementation of RERA can be a game changer for the real estate and construction sector. In addition, the constitutional amendment for an early implementation of the landmark Goods and Services Tax (GST) has been India’s biggest structural reform in decades. The landmark regulation will remove a plethora of indirect taxes and establish India as a unified market.
In 2017, India will continue to retain its position as a bright spot in the global economy, with better growth prospects expected to support commercial space leasing in 2017. Even though the global economic scenario remains muted with a rising trend of protectionism in trade and services, India’s appeal as an established outsourcing market will continue to fuel space transactions by corporate firms based out of the US and EMEA.
Despite the disruption caused by demonetisation, domestic macro-economic sentiments are likely to remain positive, relative to other major economies in the world, which will also drive leasing from domestic corporate firms.
Overall, the outlook for India’s real estate sector remains positive. We can expect more capital inflows into the segment in the year 2017, providing a stronger thrust to the sector.
The author is chairman, India and South East Asia, CBRE