Real Es­tate Deals Could Pick Up, But Prices May Not

A sta­ble govt at Cen­tre will lift in­vestor sen­ti­ment

The Economic Times - - Personal Finance - Pos­i­tive Out­look


The for­ma­tion of a sta­ble, re­for­mori­ented govern­ment at the Cen­tre has brought about the much-needed im­prove­ment in sen­ti­ment in the real es­tate sec­tor, which was reel­ing un­der a slow­down for the past 2-3 years. Mar­ket ex­perts widely ex­pect this pos­i­tive sen­ti­ment to trans­late into a pick-up in property trans­ac­tions. “We ex­pect some sen­ti­ment-driven in­crease in trans­ac­tions in the res­i­den­tial seg­ment in the near term,” said An­shul Jain, chief ex­ec­u­tive, DTZ In­dia. Added San­jay Dutt, ex­ec­u­tive MD-South Asia, Cush­man and Wake­field: “A sta­ble govern­ment will lift the sen­ti­ments of the in­vestor com­mu­nity, which has a strong im­pact on hous­ing and of­fice sales.” But this may not lead to prices in the res­i­den­tial seg­ment mov­ing up im­me­di­ately. “It will take at least 6-12 months for house prices to be­gin mov­ing up,” said Sachin Sand­hir, man­ag­ing di­rec­tor, RICS South Asia. Many mi­cro-mar­kets suf­fer from over­sup­ply. Mean­while, the realty sec­tor’s ex­pec­ta­tions from the new govern­ment are high. Top­ping its wish list is faster grant of ap­provals for projects. “We ex­pect the new govern­ment to be more ef­fi­cient and cor­rup­tion-free in the mat­ter of grant­ing ap­provals to real es­tate projects,” said Lalit Ku­mar Jain, chair­man, CREDAI and MD, Ku­mar Ur­ban De­vel­op­ment. A com­mon re­frain within the in­dus­try is that de­vel­op­ers shouldn’t be pe­nalised for de­lays. Next on the wish list is the pas­sage of the long-pend­ing Real Es­tate Reg­u­la­tion and De­vel­op­ment Bill. “By mak­ing de­vel­op­ers more ac­count­able, it will re­vive con­sumers’ trust in the sec­tor, which is rather low at present,” said San­jay Sharma, MD, Qubrex, a Gur­gaon-based real es­tate con­sul­tancy. How­ever, some of the more dra­co­nian pro­vi­sions of the Bill need to be wa­tered down. In its cur­rent form, the Bill says that if a de­vel­oper doesn’t com­ply with cer­tain rules, he could be jailed. The slow­down in sales has caused se­vere cash crunch among de­vel­op­ers. This has forced de­vel­op­ers to bor­row from NBFCs, pri­vate eq­uity play­ers and pri­vate lenders at high rates, thereby mak­ing hous­ing more ex­pen­sive for the buyer. “Fund flow to the hous­ing sec­tor from banks and hous­ing fi­nance in­sti­tu­tions needs to im­prove,” said Ku­mar. This will hap­pen only if the RBI re­laxes the pro­vi­sion­ing norms and caps ap­plied to real es­tate lend­ing, which the sec­tor re­gards as very strin­gent.

To­wards the end of its ten­ure, the UPAII govern­ment had spo­ken of op­er­a­tional­is­ing REITs. “Mak­ing REITs a re­al­ity will make much more funds avail­able to play­ers,” said Jain of DTZ.

A cou­ple of tax ben­e­fits would pro­vide im­me­di­ate fil­lip to the sec­tor. The ear­lier govern­ment had al­lowed an additional tax de­duc­tion of ` 1 lakh to per­sons tak­ing a home loan of up to ` 25 lakh. This ben­e­fit, how­ever, ex­pired on March 31, 2014. “Ex­tend­ing the tax de­duc­tion by an­other year and levy­ing TDS on prop­er­ties priced at ` 1 crore or more will pro­vide im­me­di­ate fil­lip to the sec­tor,” said Sand­hir. The real es­tate mar­ket had turned op­ti­mistic about the fu­ture out­look in re­cent months. The Knight Frank-Ficci Real Es­tate Sen­ti­ment In­dex rose by over 20% dur­ing the quar­ter

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