Real estate market wants a stable regime
Apr 29, 2014
Source : The Times of India


DELHI: The real estate sector is in a bad shape in the country. Many builders say this is mainly on account of the uncertainty in the current extended season of general election in the country.

A major Gurgaon-based builder, who does not wish to be named, says that the sector is hoping for some stability in the centre—which would enable the much-needed reforms in the real estate industry to flow in—and support, in the form of minimum infrastructural development, so that projects can be completed on time.

He says the sector would not be much affected by the ideological bent of the new party in saddle at the centre after the general election, as long as the government is stable and delivers on the ground.

Prices of property in the secondary markets have fallen substantially. In some cases, they have fallen by up to 20%.

The number of transactions has also declined substantially despite special schemes from developers like 20% of the total amount to be paid at the time of bookings and the rest at delivery. Sales are just not picking up.

Another Noida-based large developer said there is a huge uncertainty in the market due to the slowdown in economy. This, he said, has raised apprehensions of layoffs and a resultant wariness of the salaried class in risking investment in the property market, which would create a huge liability in loan repayment in case of job loss.

In this condition, developers feel that the election result will play a major role in reviving the sentiment. All the builders feel that a stable government would help in reviving the present depressed mood in the economy, which in turn would lift the fortunes of the real estate too. They also hold out the reverse scenario, where a high growth in real estate sector would help the country in improving its overall economy.

However, consultants say that the real estate sector will continue to grow in this country, as there is a huge unmet housing requirement in urban India. While the hope of high growth may be affected depending on the combination of parties that form the government, the overall growth would continue in the sector nevertheless.

If the economy improves, the demand for housing would also grow. But, if the government does not provide the requisite support to the sector, the supply of housing units may be affected. In that condition, the gap between demand and supply would widen, resulting in galloping prices of property.

Consultants say that the present slowdown in the real estate sector is temporary, especially in the NCR region, where activities will pick up as soon as the election result is out. Buyers will come back to the market even on the strength of the smallest whiff of activity, the consultants say.

Many experts say that prices will also go up irrespective of who forms the government. If a non-performing government comes at the centre, prices would increase as the slowdown in the construction activities would persist resulting in widening the gap between demand and supply. And if a proactive government were to come in, the general mood would improve across the economy, pushing the prices up once again, a developer said.

The fact remains that any government can use the sector to revive the economy of the country. The PHD Chamber and real estate consultancy firm Cushman and Wakefield in a report said that India’s urbanization is a subject of global interest and can attract billions of dollars in investment.

According to the Planning Commission, urban India is going to be home to 600 million people by 2031—an increase of 59% from the 2011 level of 377 million people.

While on the one hand this poses a huge challenge to our urban planners and developer communities, the situation also offers big opportunities. If the country as a whole rises up to meet this gigantic challenge, it will lead to the creation of millions of jobs—creating huge wealth at the same time.

It is well known how urbanization boosts industries like transportation, communication, food processing, healthcare, education, etc. The joint report keeps this reality in perspective while arguing that this whole process presents lucrative opportunities for immense investments.

However, to expedite the real estate activities to meet the urbanization requirement, the report says that the new government must create an environment where the whole system can function efficiently, so that the cost of funding real estate projects can be brought down. It says rapid development will provide higher returns to investors than investment made in developed countries. But, in order to attract investments, “higher efficiencies” must be built into the process of urbanization.

The report praised the current government for launching the Jawaharlal Nehru Urban Renewal Mission (JNNURM). According to the March 2012 data from the ministry of urban development, the JNNURM has approved projects worth $11.2 billion. But, the report questioned the efficacy of the whole process. It said policies and plans must be supported by sound execution.

But developers feel that urbanization is still not on the priority list of most of the political parties. In fact, the real estate sector is still considered by many as a sector, which thrives only on black money. Premier developers’ bodies like Credai and Naredco have long demanded that a regulator should be formed for the sector, which would monitor the industry and safeguard all the stakeholders’ interests.

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