The Real Estate (Regulation and Development) Act, 2016 (RERA) has brought in a transformed and regulated system in the Indian real estate market. Although the implementation of RERA is still in its nascent stage, the future of the Indian real estate market looks promising. The new regulatory regime also contributes to a simplified taxation system (GST), financial discipline and buyer safety mechanism. For developers and builders, it is still a struggle to cope with the regulatory reforms. However, for buyers this is the ideal time to own property.
New project launches lowest this quarter: According to the Centre for Monitoring Indian Economy, new project launches by developers have decreased by 29% and from the year-ago period by 60%. Due to this reason, many developers have put on hold new project launches in order to gauge the impact of RERA. Property prices have fallen or stagnated in many cities, especially where investment demand was the driving mechanism of the real estate market.
Buyer-driven market: With the implementation of RERA, there is an accumulation of unsold inventory, leading to an excess in supply. Also, developers are trying to complete ongoing projects on time and sell the existing inventories quickly. This is the reason why there is a drop in real estate prices and availability of a large number of ready-to-move-in houses. RERA has increased transparency in the housing sector and has put buyers in a stronger negotiating position. Developers are also offering discounts on prices, including attractive deals like free parking spaces and club membership.
Large availability of affordable homes: Under the government’s initiative like the Pradhan Mantri Awas Yojana, the budget allocation for the economically-weaker sections and lower income group has been increased to 10 billion this year. Developers working on affordable housing projects have the advantage of receiving external commercial borrowings and extended time to complete their projects. While the property prices are still undergoing slow-paced corrections, buyer confidence has increased, which makes it ideal for buyers to own a house or property.
Housing sales in Secondary Property Market increased: Sales of ready-to-move-in houses have increased by 10 to 12% this year as buyers do not want to take risks in buying or investing in under-construction properties or homes. These homes are not only readily available, they also provide easier rental outgo and EMIs. GST exemptions also apply for ready-to-move-in homes and land. For buyers, this is the ideal time to buy or invest because of the advantage of seeing the houses and the construction quality including easy negotiation deals.
Government initiatives a boost for the real estate sector: The implementation of GST and RERA Act 2016 is a move towards safeguarding the interests of buyers from unscrupulous developers and builders. Resale market buyers received a drop in ready-to-move-in properties both for sale and rent, making it ideal for buyers to invest during this time. For developers, on the other hand, finding buyers for ready-to-move-in properties in the primary market becomes challenging as their prices are slightly higher than compared to the secondary real estate market. The initiatives of the government have protected the interests of buyers by enabling them to track construction of buildings and properties at every stage till it is completed.
Creating positive user experience through Artificial Intelligence: The age of digitization has touched the real estate sector too bringing in less dependency on intermediaries. Through AI, the real estate companies can easily help their customers in making informed decisions and help the end-users track all information and progress on the on-going projects. AI also helps customers pick out their ideal homes based on the parameters listed like office location, distance from your child’s school or college, etc. All details pertaining to finding a suitable home can be monitored and accessed with just the click of a button.
Accountability to real estate sector after RERA: The need for RERA stems from the persistent complaints from buyers that real estate transactions were in favor of developers. With the implementation of RERA, buyer confidence has increased immensely and brought in transparency in the system. Although it is a work in progress, the future of real estate in India seems promising and optimistic especially for buyers.
The real estate sector is showing signs of recovery and is on the right path towards a buyer-friendly environment. The regulatory reforms will surely reinforce the trust amongst buyers and although the progress is still taking shape, these reforms are likely to enable a positive growth for the real estate industry in India.
(By Anjan Rangaraj, CEO, Catalyst Properties)