Real Estate Growth Trajectory

//Real Estate Growth Trajectory

Real Estate Growth Trajectory

India’s real estate sector witnessed some significant developments over the past year and a half. These have changed the face of the industry and augur well for it in the long run. The sector has become more transparent and organised owing to recent policy changes and consumers are better off for these.

Recent reforms in the real estate sector –

  • The Real Estate (Regulation and Development) Act 2016 (RERA) came into force from May 2017, bringing unprecedented levels of transparency into real estate projects. RERA promises to minimise delays in projects, weed out unscrupulous developers, and provide homebuyers with detailed information on the specifications and the progress of the projects they invest in.
  • RERA was followed by the introduction of the goods and services tax (GST) which has come as a relief for both consumers and developers, by bringing clarity into the process. Moreover, it will lower the cost of construction, and bring more liquidity into the market.
  • In 2016, the amendments made to the Benami Transactions Prohibition Act coupled with the Central government’s stated intent to make Aadhar linkage compulsory for all property transactions, will help in curbing malpractices and stopping the inflow of black money into real estate.
  • The other major factor that could give a boost to real estate in the near future is affordable housing. In 2017, the government tried to incentivise affordable housing with renewed zeal. The government is trying to attract both middle-income and low-income groups to this segment. In a much-awaited move to change this situation, the Union budget for 2017–18 granted infrastructure status to the affordable housing segment.
  • Home loan interest rates have gradually been decreasing over the past few years, and banks and financial institutions are offering varied, attractive schemes to incentivise customers.
  • The recapitalisation of banks will also rejuvenate the banking sector and give a boost to lending. This will spur healthy competition between different actors and ultimately result in cheaper loan options for consumers.
  • The Reserve Bank of India had slashed key interest rates by 25 basis points (a basis point is one hundredth of a percentage point) in August, and kept the repo rate unchanged in December. This, too, will help in lowering interest rates on home loans.

Impact –

  • All these developments will not only bring transparency and accountability, but also consolidation in their wake.
  • Developers need to be sufficiently funded to achieve RERA compliance. Small or cash starved developers will probably have no choice but to partner with larger, established players to survive. The real estate sector will be institutionalised, and probably have fewer—but larger and more reliable—developers in the years to come.
  • These new policies, if implemented well, could give a much-needed boost to this segment and make it a powerful growth driver for the real estate sector.
  • Affordable housing can achieve the desired levels of momentum and growth much faster with the participation of the private sector, which has shied away from it so far for several understandable reasons.
  • A boom in affordable housing and the resulting construction and allied jobs can help make a significant dent in the malaise of joblessness.
  • It can also have a multiplier effect on the national gross domestic product, and boost the demand for different categories of products and services.

Conclusion –

India’s real estate is transitioning to a new era after what has been a rather eventful year. And the prospects for homebuyers, developers, and the financial ecosystem are brighter than they have ever been.

By | 2018-01-10T00:33:22+00:00 January 10th, 2018|Categories: GS Paper 3|0 Comments

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