The prospects for developers, homebuyers and investors are brighter than ever considering the way different policies have been implemented in the real estate sector.
The real estate sector has seen a lot of changes in the last one-and-a-half years. The changes have led to the real estate sector being more transparent and structured. Beginning from the RERA or the Real Estate (Regulation and Development) Act, 2016 which made projects to be completed on time mandatory and allowed for greater transparency to GST, which is likely to lower the overall cost of construction and bring in more liquidity to the market, policy changes have led to significant changes in the real estate market.
The real estate sector is likely to benefit from the changes made in 2016 to the Benami Transactions Prohibitions Act as well. Coupled with the intended linkage to Aadhaar card, the malpractices in the sector can be curbed along with the flow of black money into the system. All these developments are significant considering that experts feel the real estate sector needs more transparency and accountability in order to be more attractive to prospective homebuyers as well as investors. At the same time, developers need to be adequately funded to be able to fully achieve the parameters set by RERA. Smaller developers would ideally look to partner with rich developers in order to survive in the market. But fraudulent developers will have no say in the industry which will be much more organized and transparent once RERA starts showing its impact fully. In the years to come, RERA is seen to bring in the required winds of change with more institutionalism and structured growth in the industry with fewer but reliable developers.
With these changes, the first half of 2018 is expected to see the rise of real estate sector in the country. For ready-to-move-in properties, financial institutions and banks are offering varied and attractive schemes coupled with the falling home loan interest rates. There would also be a boost to lending with recapitalisation of banks. Cheaper loan options for consumers as a result of competition between different stakeholders will enable more consumers to invest in homes. Key interest rates were slashed by RBI to 25 basis points in August 2017 with no change in repo rate in December 2017. This also helped lower interest rate on home loans. In the past one-and-a-half years, home loan interest rates have come down from the range of 9.3-9.5% to 8.3-8.4%.
The sector will receive further boost with affordable housing apart from home loan interest rates. More people from the middle and low income groups have been encouraged by the government, whether married or single, to buy their own homes under the Pradhan Mantri Awas Yojana (PMAY). Under PMAY, even unmarried young adults can apply for home loans.
The PMAY which was originally scheduled to be ended by December 2017 has now been extended till March 2022 and includes the middle-class income group as well for the benefit of interest subsidy on home loans. Under the scheme, the carpet area of homes has been increased to provide for more interest subsidy by the Cabinet. An interest subsidy of 6.5 per cent can be availed for a period of 20 years or during the tenure of a loan, whichever is lower by the low-income groups or economically weaker sections of the society.
Affordable housing which is a dream for many households can be achieved through the participation and push from the private sector which has stayed away from it for several reasons. In order to change the situation, the Union Budget of 2017-18 accorded infrastructure status to the affordable housing segment. As many as eight PPP projects have been announced in the segment by the Ministry of Housing and Urban Affairs to include more private say in the segment. These are some of the changes that can bode well for the future of real estate in India with its emphasis on affordable housing category.
The impact of such moves will help create more jobs in the real estate sector. The National Gross Domestic Product and different services and products will also have a multiplier effect if affordable housing finds resonance on a large scale. The prospects for developers, homebuyers and investors are brighter than ever considering the way different policies have been implemented in the real estate sector and it is a matter of time before the ecosystem finds its footing.
(By Honey Katiyal, Founder & CEO, Investors Clinic)