In­dian Prop­erty Bub­ble

From a hum­ble be­gin­ning in the gar­ment in­dus­try in 1972, the Karle Group di­ver­si­fied into real-es­tate and in­fra­struc­ture de­vel­op­mentin the year 2005. Sankar Subrah­maniyam, coo, Karle in­fra Pvt ltd briefs on the cur­rent real-es­tate sce­nario.

Realty Plus - - Contents -

In the wake of de­mon­e­ti­za­tion in Novem­ber 2016, many banks have cut home loan rates. The govern­ment has also an­nounced an in­ter­est sub­sidy of 3-4% for first-time af­ford­able hous­ing home­buy­ers in 2017. All these ini­tia­tives will help en­tice buy­ers back into the res­i­den­tial mar­ket. We ex­pect de­mand for qual­ity stock in ar­eas with good con­nec­tiv­ity and so­cial in­fra­struc­ture to re­vive in the near term, es­pe­cially in mid-seg­ment hous­ing. How­ever, re­al­is­tic pric­ing will be the key to an early re­vival as right now both buy­ers and sellers are hang­ing on in the hope of achiev­ing op­ti­mum prices.

im­pact Of gst ON Realestate sec­tor The im­pact of the GST on prop­erty prices will be chal­leng­ing to gauge at this stage be­cause of the lack of clar­ity on abate­ment for land value. In a prod­uct, where the ma­jor raw ma­te­rial is not cov­ered by the GST and the com­pleted unit is also not cov­ered by the GST, the tax in­put ben­e­fit will be hard to cal­cu­late or jus­tify. An­other im­por­tant fac­tor that needs to be ex­am­ined, is the stage of con­struc­tion. If the project is at an ad­vanced stage, where sub­stan­tial cost has al­ready been in­curred be­fore the ap­pli­ca­tion of the GST, very lit­tle in­put credit will be avail­able and very less ben­e­fit will be passed on. If the project is at an early stage, more ben­e­fits can be passed on. It is im­por­tant to note that if GST ex­emp­tion is ex­tended to af­ford­able hous­ing projects (af­ford­able hous­ing is cur­rently ex­empted from ser­vice tax and a clar­i­fi­ca­tion is ex­pected from the govern­ment for ex­emp­tion from GST), then af­ford­able homes may be­come cheaper un­der the GST regime. In the case of pre­mium prop­er­ties, while the ba­sic con­struc­tion cost may come down a lit­tle, but as the in­put tax credit is lim­ited to 12 per cent, it will not be suf­fi­cient to bring down the fresh tax li­a­bil­ity to nil be­cause of the taxes paid on other ex­pen­di­tures.

Rera con­se­quences FOR Re­alty

RERA calls for firmer com­pli­ances and trans­parency. While, the rules for the UTS were no­ti­fied by the Cen­tre, States can make changes to the cen­tral law de­pend­ing on their re­quire­ment but they can’t com­pletely di­lute the pro­vi­sion of the par­ent Act. Though there may be ini­tial ap­pre­hen­sions from the de­vel­oper com­mu­nity, it may prove to be ad­van­ta­geous to the se­ri­ous play­ers as the non-com­pli­ant de­vel­op­ers will be at the re­ceiv­ing end.

Com­ing to the im­pact on price of the prop­erty of even though when per square feet price changes; the over­all cost of the prop­erty may not be im­pacted much.while the move to car­pet area-based sales from su­per built-up area might not have a di­rect bear­ing on pric­ing, home buy­ers will now be in a po­si­tion to make bet­ter­in­formed de­ci­sions as there will be im­proved clar­ity on the space be­ing of­fered.

the buy­ers’ sen­ti­ment stayed cau­tious over 2016 and mid­seg­ment projects en­joyed fair suc­cess. De­vel­op­ers will prob­a­bly re­sist cut­ting prices but con­tinue to lure cus­tomers with of­fers and there is an ex­pec­ta­tion that the res­i­den­tial mar­ket will pick up steadily over 2017.


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