Conditional optimism prevails
Among realty stakeholders in Punjab, expectations are for a market revival in 2018
At the end of 2016, there were strong warning signs that 2017 might turn out to be a tough year for the real estate sector. The demonetisation policy was announced in November and start of the new year saw both sales and demand collapsing in the sector.
It was a bad start for the sector and the year saw subdued sales. The only exception to the general subdued market sentiment was demand and sales in the relatively smaller sized affordable housing options, which fared better than the general market trend. In the last quarter of 2017, the housing market stabilised with the trend of sharp fall in prices and demand, giving way to greater stability.
“There are sure indications that the worst is over for the housing sector in Punjab. Full recovery is still far. But we can expect 2018 to witness greater buyer presence. Also the supplydemand gap, which was large around three years ago, narrowed this year. In the last two years, the number of new launches dropped sharply. Though, this year there were some instances of new launches, but overall there was minimal addition of new supply in the market. At the same time, the stock of unsold inventory steadily declined,” says Prateek Mittal, chairman, real estate and infrastructure, north India regional council, ASSOCHAM (Associated Chambers of Commerce and Industry of India).
KEY TO MARKET REVIVAL
Though realty stakeholders share optimism about the sector’s future in Punjab, yet it is conditional on several factors. The role and interventions made by the government can prove crucial for the future trajectory of growth in the sector.
Multiplier effect: The housing sector demand depends heavily on the overall economic growth scenario. “The government support and intervention is a must for boosting industrial growth rate in Punjab. A lot of industry left the state in the previous five years and this trend has to be reversed. Unless surplus is generated in the industrial and service sectors the positive demand movements can’t happen in the housing sector,” says Himanshu Pant, 37, Chandigarh business head and chief operating officer of a nationallevel developer.
By promoting industry, the
state government can create buyers for the realty sector, and help boost the subdued market sentiment. Bringing back the NRI
investor: The level of market participation of the NRI realty investor is an important determinant of the growth in the sector particularly Punjab’s Doaba region. For the last few years, several factors — local, national and international have contributed to the decline in the number of NRI investors in the state. “Locally, returns for the NRI investors dipped and at the same time, in their countries have settlement property market growth picked up in the last couple of years,” says Anil Chopra, 64, a Jalandhar-based builder and chairman of the state chapter of CREDAI (Confederation of Real Estate Developers’ Associations of India).
The high incidence of legal problems faced by the NRI investor in the state also contributed to the decline in the investment inflows from them.
“The state government has to create healthy conditions so as to bring back the NRI investor. The NRI investor not fuels growth in the places where they invest but boost the sentiment across the state. At present, because of unsupportive policies, the NRI investor has turned from net buyer to net seller. This is major factor slowing down growth in the state’s realty sector,” says Chopra. Infrastructure development:
Infrastructure development is another important factor that can determine the sector’s growth pattern in 2018. “The state government should focus on the development of local infrastructure. The external development around projects is the responsibility of the state government, and builder pay EDC (external development charges) to the government for achieving this. In areas where the infrastructure is either developed or is developing fast are faring better in buyer demand than other areas. The airport road in Mohali is good example of how a road transformed the realty prospects of an area,” says Mittal. Encouraging lawful
builder activity: Illegal colonies have become the bane of the realty sector in the state. Government actions and non-actions in this regard have only encouraged mushrooming of illegal colonies. Government’s regularisation offerings discourage the lawful builder and negatively impact the overall realty growth.
“The government must rethink its attempts at regularizing the illegal colonies. The builder who follows the government rules and regulations regarding the road width, density, internal infrastructure, etc and pays the requisite fees and charges to the government, but, is in fact, penalised by the government when it announces amnesty schemes for builders who develop illegal and unauthorised colonies,” says Chopra.
Affordable housing: In 2017, both the state and central governments promoted affordable housing and it is considered as one of the factors along with relatively low home loans for reviving demand in the sector.
“More and more builders are entering the affordable housing segment. Though even after several positive policy decisions for the segment, some aspects need a look again. For instance, current density restrictions in Punjab don’t encourage builder in construction of smaller size units,” says, Mittal.
Bringing in stamp duty under the GST (goods and services tax) can also help in bringing back the buyer to the housing market. “The Rera Act, if implemented effectively, can bring back trust in the realty sector. Buyers withdrew from the market as builders failed to deliver on their promises. This is expected to change with state real estate regulatory authorities in place,” says Pant.
Further, reduction in home loan rates can also help revival in the sector. “The key to the market revival is the small investor and positive market sentiment is of paramount importance for same. All stakeholders, particularly, the state government must take steps to boost market sentiment in the state’s realty market,” says Chopra.