APPRAISING the 2019 general elections: Will INFRASTRUCTURE WIN?
Will infrastructure Win?
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.