Affordable housing, RERA and Housing for All are a few steps/policy measures that experts vouch for when they are asked to assess three-years of Narendra Modi’s government. Introduced in the last three years, these measures appear to have revived the trust of home-buyers in the sector and reinstated belief of a revival. Real estate sector has reportedly been plagued with corruption and apparently, there were no rules to check many defaulting developers. However, with the present government looking serious towards affordable housing, the real estate sector also appears in a bullish state. The Real Estate Regulatory Bill, which has been hailed as the biggest victory for the sector, came into force earlier this month.
In a bid to boost rural and urban housing post demonetisation, Prime Minister Narendra Modi had also announced interest subsidy of up to 4 per cent on loans taken under the Pradhan Mantri Awaas Yojana. Besides, in urban areas housing loans of up to Rs 9 lakh and up to Rs 12 lakh will receive an interest subsidy of 4 per cent and 3 per cent respectively, while in rural areas loans up to Rs. 2 lakh will get an interest subvention of 3 per cent.
In its tenure so far, Modi government has also launched 100 Smart Cities Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and has relaxed the FDI policy for the real estate sector and announced the easing of approvals process for realty projects. The Infrastructure status granted to affordable-housing during this year budget has also been adjudged as a significant move. But is this all the real estate sector needs? FEonline spoke to a few experts to get a clear picture on the real estate sector – what more it needs and how the steps taken till now will affect the sentiments.
According to experts, the Indian real estate market is at a stage where it can only rise as home prices have come down by 15-20 per cent in the last year-and-a-half due to corrections, which combined with the reduction in home loan rates has helped improve sales in last few months.
As per the recent report of CLSA India Pvt. Ltd., in the next seven years, there will be an investment worth $1.3 trillion in the housing sector. The report also states that the real estate sector is expected to witness the construction of 60 million new homes between the year 2018 and 2024 having direct, indirect and induced effects on the development of over 250 other ancillary industries such as cement, steel, paints, etc.
Amit Modi, VP CREDAI Western UP and Director ABA CORP said, “We must appreciate the fact that the government is very serious on the mission of housing for all and in the same light we have seen some extremely aggressive approach towards affordable housing. In February, the government granted affordable-housing “infrastructure status,” which is quite significant to the sector as it will provide cheaper sources of finance to developers and also open up additional avenues for developers to raise funds.”
Modi further added that the move of long-term financing at lower rates will reduce the costs of construction for developers allowing them to pass on benefits to consumers. Infrastructure status granted to the affordable housing along with other tax sops would give a fillip to the market as such projects would now be able to attract investments from institutional, pension and insurance funds and external commercial borrowings at attractive rates. This measure will allow low-cost and long-term funds for the sector, which when passed on to homebuyers, will reduce the cost of affordable housing.
However, Knight Frank (India) Pvt Limited executive director – advisory Gulam Zia has another perspective to add to affordable housing and Housing for All by 2022. Hailing the government’s moves, Zia feels the although the promise of completing ‘Housing for All by 2022’ is beyond the next general election of 2019, but on the ground, it is yet to take shape. The steps are perfectly poised but now it is time to pace up. The moves face the challenge on two fronts: Affordability of land and the prices are the biggest challenges which developers face and secondly, the there is need to improve infrastructure in terms of roads, transportation etc.
RERA became a reality this month and a lot has already been written on how it will benefit the sector. Experts call it a long-term policy measure whose effect will be pretty permanent, in the sense that it will drive unscrupulous or unorganised developers off the market and leave a level playing field for credible players in its wake.
“Real Estate (Regulation and Development) Act, 2016 finally coming into force, India has now got its first realty regulator. The Act brings in much-needed transparency and a range of benefits for both, buyers and developers. The RERA is a good and long overdue step, the rules will bring sanity and fair play into the developer-buyer equation. With the implementation of RERA we foresee sector to be more transparent and the developers more accountable. Homebuyers will be finally able to bid goodbye to inordinate project delays, shoddy quality of construction and extra cost. Now Selling on carpet area would mean that the buyers would know from the very first day the exact area they will get and the total amount for the same. This also means that the developers will not be able to increase the price of the unit by way of increasing the saleable area in the later stages of development of the project, therefore, making the process much more transparent and making the pricing static,” Samir Jasuja, CEO and Founder PropEquity said.
On RERA, Modi added that the need of the hour is a ‘Single window for smooth RERA’, as an online single window clearance mechanism with bare minimum human interface and precise deadlines for approvals is very much required to bring down the time of project delivery and curb any scope for undue gratification in granting permissions. A law without making all the stakeholders concerned accountable will not be able to help the purpose at large. Projects are often delayed due to graft in the issuance of permits and clearances.”
Apart from approvals and time-delays, regulatory mandates like getting plinth certificates at the completion of each floor, hassles in getting occupancy certificates and obtaining ‘non-agricultural land clearance’ for land that is already under the city development plan are also creating a havoc on a real estate developer.
Therefore, Amit Modi advocates putting in place the single window clearance for building permissions so that developers, as well as end consumers would benefit from lower approval time as the biggest delays in delivery of houses, occur due to delay in approvals of projects and authorities have a major role to play in.
Knight Frank’s Gulam Zia elaborates on RERA implementation and said that with this significant move, things will start falling into place, but the results of these steps would take time and may not happen overnight. The government would need to continue working on keeping the sentiments high. “Many states have already taken the right steps in implementing RERA, but now Centre should keep on sending right messages to keep the sentiments high in the real estate sector,” he added.
How will the road ahead be
“Better home sales are expected to gradually move ahead by the end of the year and will also see a spurt in launches in some locations. The reforms in the real estate sector have made investments into this sector even more lucrative. The recent implementation of the real estate bill wherein the investors can look forward to far higher transparency and ease of doing business with developers has led to a lot of warming up of NRIs and other FDI money towards Indian real estate,” Modi said.
Zia feels the sector would a great gradually, but the clock has started ticking. “Most of the things are coming into long-term perspective. The expectations are high from the government and it should pace up and started delivering faster before people give up on their patience. All the steps taken by the Narendra Modi government have to visible in the growth rate of the industry.”