Real Estate Deals Could Pick Up, But Prices May Not
A stable govt at Centre will lift investor sentiment
SANJAY KUMAR SINGH
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