The 7th pay commission hike along with upcoming festival season may prove beneficial for the real estate sector by bringing back homebuyers to the market.
The 7th pay commission hike along with upcoming festival season may prove beneficial for the real estate sector by bringing back homebuyers to the market. A recent report by PropTiger has said the government policies relating to the sector – RBI slashing repo rate by 25 basis points, REITS norms relaxation by the Sebi and schemes to boost affordable housing seem to be having some positive effect on the sector. Homebuyers in the past have kept away from the real estate markets due to price rise and unaffordability. The sentiments were also affected by delayed projects and lack of confidence among buyers.
According to the PropTiger study, the pressure of unsold inventory in the residential market reduced from 38 months in April-June 2015 to 35 months for the quarter ended June 30, 2016. It further added that residential sales witnessed a quarter-on-quarter increase of 8 per cent in first quarter of 2017 as against decline of 3 per cent in the fourth quarter of 2016 with Bengaluru, Pune and Mumbai accounting for 61 per cent of total sales in the first quarter of 2017.
Anurag Jhanwar, Business head (Consulting and Data Insights), PropTiger.com and Makaan.com, said: “With improved activity driven by softening interest rates, stagnant prices and controlled supply, the subsequent quarters in residential real estate should see more action. Largely, the sales and prices are expected to be range-bound, with a positive bias in the short term.”
So, what would drive the real estate sector in the near term? PropTiger help us identify:
1. Indian rupee’s performance has been stable as compared to other major currencies overseas. A reduced repo rate along with controlled inflation are expected to favour buyers raising affordability and purchasing power, important for stimulating housing demand.
2. Seventh Pay Commission is expected to boost the real estate sector as it will lead to a hike in central government employees’ salary by 23.55 per cent, with effect from January 1, 2016. Rs 1.02 lakh crore of additional income will come into the hands of government staff and pensioners, encouraging investment in residential real estate, especially in Tier-I and II cities.
3. Non-Resident Indians’ (NRIs’) could look to India as a favoured near-term real estate investment destination in the luxury segment following weakening of pound against the rupee as a fallout of Brexit.
4. The upcoming quarters could see better performance on sales, primarily driven by the upcoming festive season, offers, schemes and freebies given by developers to attract new buyers, coupled with home loan schemes by financial institutions.