Return of stable realty growth in state
Trend in the past few months in the realty sector indicates that the sector is not only reviving, but there are positive changes in the market too.
A number of major reforms in the economy and the realty sector, brought in by the Union government in 2017 after an initial shock, are starting to make a positive impact on the sector.
One setback, though, say local real estate experts, is the re-introduction of the regularisation policy for illegal colonies by the state government.
END-USER: THE DRIVING FORCE
The revival of the housing is coming on the back of the enduser getting back to its buying ways. “All price segments in the housing sector are registering the end-user buying. The volumes in the smaller ticket size are more than the higher priced segments. The price segment of ₹40 lakh-₹60 lakh is the most popular currently,” said Prateek Mittal, chairman of Real Estate and Infrastructure, Regional Council (North India), ASSOCHAM.
According to realty experts, investor activity has also marginally improved in the commercial property segment where builders are offering fixed return schemes. “In the residential segment, introduction of subvention scheme is making a difference along with a number of interest subsidy schemes being offered by the government for buyers in different income groups,” added Prateek.
In terms of segments, industrial plots and residential segment are doing better than the commercial segment. “With reforms in the taxation system expected to bring in greater transparency and fair play in the economic activity, the new breed of entrepreneur entering the economy is giving a boost to the industrial plot segment. The residential segment too is gaining from the end-user buyer. The fate of the realty sector ultimately depends up on the growth in other sectors of the economy. After introduction of the Goods and Service Tax (GST), there was sudden slowdown in the economy. Now, the economy is starting to move forward again and this is having a positive impact on the realty sector,” said Rajinder Mittal, Mittal Group of Companies chairman.
ILLEGAL SHOCK
The regularisation of illegal colonies is all set to become a reality after much controversy is being seen as a punishment for the builders who followed the state’s laws and paid government charges and fees.
At the same time, the policy is being perceived as an unjust reward for colonisers who have consistently violated the state laws and didn’t pay any charges.
Anil Chopra, a Jalandhar based builder and chairman of the state chapter of CREDAI (Confederation of Real Estate Developers’ Associations of India), said, “It is a disturbing development. The state government is making it a habit to reward the land mafia which violates every realty law in the state by offering these illegal colonies. A law-abiding builder spends nearly four to five times more than the coloniser of an illegal colony in developing internal infrastructure and for the development of external infrastructure by the state government. It has to spare nearly 45% for the open spaces and maintain the project even after five years of possession delivery. For illegal colonizers, no such restrictions are there and it has no liability toward the buyer. In fact, an illegal coloniser is destroying urban spaces in the state.”
It will be difficult for urban areas in the state to recover from repeated amnesty schemes for the illegal colonies.
“Government should stop penalising developers who are paying a hefty amount to develop their projects. This will make such developers uncompetitive against illegal colonisers who sell their properties at less than half the normal market price,” said Rajinder.
REAL ESTATE SECTOR IN THE STATE IS MOVING TOWARDS REVIVAL AS DEMAND, SUPPLY AND PRICES STABILISE AFTER NEARLY FIVE YEARS OF SLOWDOWN AND STAGNATION
RERA IMPACT: IMPROVED BUYER CONFIDENCE
The establishment of the real estate regulatory authority is having a positive impact on the buyer confidence. One of the major reasons for realty slowdown and drop in demand was the buyer losing confidence in the builder’s ability and willingness to deliver timely possession and promised quality.
Buyers were a harassed lot, struggling to get justice against the defaulting developers. Many buyers, after their life’s saving, were struggling to get possession and were held up in different courts – civil, criminal or consumer courts to make the builder accountable for its misdeeds.
Now, with the setting up of the state Rera, this is starting to change.
“Buyers, particularly, in the new projects, feel that their investment is secure as the Rera is going to safeguard their interests. This is good news for the overall market growth and sentiment. Though, we are still to see justice being delivered by the state Rera, but even its establishment has boosted the buyer morale,” said Sandeep Mathur, a private sector bank manager and a prospective home-buyer.
Another impact of setting up the Rera is the greater urgency among the builder with incomplete project to complete these and offer possessions to the buyer. This is also helping the home-buyer to make a positive decision to enter the housing market, say local real estate experts.
MARKET CONSOLIDATION
Different reforms in the economy and real estate sector have fueled greater consolidation in the quality and the number of developers active in the realty sector. “While earlier there was large number of big and small players in the market trying to get the eye of the buyer, this has changed dramatically in the last one year. Now, most of the active developers are here with long-term perspective and are focusing on delivery and building a brand name,” said Prateek.
While the number of new launches still remain low, but only more professional developers are launching new projects. The unprofessional ones are only focusing on completing the older projects and exiting the market at the earliest. These developers were mainly depended on the speculative investors for their survival and growth, and with only the enduser active now such builders are finding it hard to survive.