AP­PRAIS­ING the 2019 gen­eral elec­tions: Will IN­FRA­STRUC­TURE WIN?

Will in­fra­struc­ture Win?

Realty Plus - - Contents - shubhra saini

Gen­eral elec­tions are both ex­cit­ing and nerve rack­ing for the real es­tate sec­tor. ex­perts as­sert the in­dian real es­tate sec­tor will only gain trac­tion in 2019 if the over­all macroe­co­nomic en­vi­ron­ment re­mains favourable. the up­com­ing gen­eral elec­tions will def­i­nitely play a piv­otal role in this. For any sec­tor to do well, how­ever, a sta­ble gov­ern­ment at the cen­tre with a strong hold on the ba­ton of change is in­dis­pens­able.

the real es­tate sec­tor in In­dia has been set­tling down with the spate of pol­icy-level re­forms and reg­u­la­tory mea­sures in­tro­duced in the past 2-3 years. Whether it is the Real Es­tate Reg­u­la­tory Act (RERA), Be­nami Trans­ac­tions (Pro­hi­bi­tion) Act or Goods and Ser­vices Tax (GST) regime, the clouds of un­cer­tainty are dis­s­ap­at­ing and the sec­tor can fi­nally see the sil­ver lin­ing. That be­ing said, all struc­tural changes that took place in 2017 will need a few years to ma­te­ri­al­ize, if not slightly longer. As the con­sumer con­fi­dence grows, there are some signs of progress in the sec­tor wit­nessed in the past few months. At the same time, we should ac­knowl­edge that the num­ber of project launches across the coun­try has gone down sig­nif­i­cantly and thus the erst­while sce­nario of over­sup­ply is re­duc­ing quickly. Look­ing at the pos­i­tive sce­nario that the realty sec­tor is wit­ness­ing, the cur­rent growth mo­men­tum must sus­tain and not slow down even with the gen­eral elec­tions com­ing up in the first half of 2019.

arvind nan­dan ex­ec­u­tive di­rec­tor, Re­search, Knight Frank in­dia Talk­ing about the im­pact of re­forms, says, “We re­al­ize that we are pass­ing through a ‘bridge of time’ in 2018, which has had a se­ries of cru­cial events on one side in 2017, and is head­ing to an­other land­mark event, namely, the gen­eral elec­tions of 2019, on the other. The elec­tions of 2019 are un­likely to change the di­rec­tion of real es­tate evo­lu­tion, ir­re­spec­tive of any gov­ern­ment. We have started to wit­ness very grad­ual, though be­low the sur­face move­ments, and in a mat­ter of 6-12 months, the ac­tiv­ity lev­els should get bet­ter. One must also bear in mind that there has been a strong head­wind in re­cent times, lead­ing to pres­sure like a slid­ing ru­pee, mar­ginal dip in in­dus­trial pro­duc­tion, etc., cou­pled with fi­nan­cial mar­ket stress. But these should be ad­dressed over the next cou­ple of quar­ters. The world bank and most in­ter­na­tional in­sti­tu­tions have reg­u­larly re­posed faith in the In­dian econ­omy’s in­her­ent strength, which should help the mar­kets get bet­ter in due course.”

Ramji sub­ra­ma­niam Manag­ing di­rec­tor at sow­parnika in­fra­struc­ture Pvt. ltd. is of the opin­ion that gen­eral elec­tions are not sub­stan­tive for the real es­tate de­vel­op­ers, but it af­fects buyer sen­ti­ments as they adopt a wait and watch ap­proach. Their ex­pec­ta­tions from the new gov­ern­ment would be high, with the buy­ers look­ing for­ward to new schemes, poli­cies and of­fers. Sub­ra­ma­niam fur­ther elab­o­rated, “the new ini­tia­tives un­der the Prime Min­is­ter’s Awas Yo­jana (PMAY) have en­cour­aged the masses to own their dream homes, fur­ther giv­ing an im­pe­tus to af­ford­able hous­ing and boost­ing the real es­tate sec­tor. Now, with the 2019 elec­tions set to be held in a few months, prospec­tive home buy­ers will be ea­ger for new re­forms and sub­ven­tion schemes. It will def­i­nitely make a dif­fer­ence to the sec­tor in terms of buy­ers’ out­look and de­sire to pur­chase a house.”

Re­it­er­at­ing Sub­ra­ma­niam’s views, even Pradeep ag­gar­wal, co-founder & chair­man, sig­na­ture Global Group, also opined, “Elec­tions do not af­fect the real es­tate mar­ket as such. How­ever, it im­pacts the sen­ti­ments of home buy­ers and in­vestors. The new gov­ern­ment may bring new schemes, of­fers and poli­cies which may or may not be con­ducive for in­vest­ments. For de­vel­op­ers, the sit­u­a­tion re­mains sim­i­lar, only the stakes go higher.”

Putting things into con­text, ashish Bhutani, Md, Bhutani Group, said, “The new sup­ply will go fur­ther down as most de­vel­op­ers would pre­fer to wait for the elec­tion out­come and launch their new projects once this mega event is over. Cer­tainly there are rea­sons for this stance; we can­not rule out the pos­si­bil­i­ties of amend­ments in poli­cies with the new gov­ern­ment form­ing at the Cen­tre. This means, due to lim­ited in­ven­tory, prop­erty buy­ers will have fewer op­tions at their dis­posal and the sup­ply-side may start strik­ing equi­lib­rium with de­mand sooner than later.”

Con­ven­tional wis­dom says that the best time to in­vest is when the mar­kets are near the bot­tom. There has been a pro­tracted stress in real es­tate mar­kets, with a hope of re­vival which keeps shift­ing for­ward ev­ery few quar­ters. Shar­ing his ex­pe­ri­ence on the same, anuj PURI, chair­man - anarock Prop­erty con­sul­tants, “Buy­ing de­ci­sions for end-users should be dic­tated by need and af­ford­abil­ity. The re­sults of the elec­tions can­not be pre­dicted, but there is a chance that prices may rise after they hap­pen.” “Post elec­tions, real es­tate prices may shoot up as the in­vestor seg­ment will con­sider en­ter­ing the mar­ket more force­fully, though much will rest on the sta­bil­ity in the po­lit­i­cal sce­nario. A de­ci­sive gov­ern­ment at the Cen­tre will drive large in­sti­tu­tional and pri­vate eq­uity (PE) in­vest­ments to in­fuse huge cap­i­tal in the sec­tor. In the other case, even if there is a gov­ern­ment with weak ma­jor­ity, peo­ple will need to buy res­i­den­tial and of­fice real es­tate to ful­fill their ba­sic ne­ces­si­ties, and the end user seg­ment will re­main the prime fac­tor driv­ing mo­men­tum,” ex­plained, Bhutani.

From an in­vestors’ per­spec­tive, this is a good time to en­ter the mar­ket, since the sup­ply side is un­der pres­sure to clear stocks. More­over, with the cen­tral bank hav­ing held the repo rates steady for now, the win­dow of op­por­tu­nity is just about avail­able.

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