Indian Realty Market Prepared to Toss Grim Speculations On Market Slowdown
A leading daily in London published a report stating about a possible fall in property prices on a global scale after the world witnessed an alarming price rise in many advanced countries like New Zealand, Canada and Turkey. The theory was suggested by the Organisation for Economic Co-operation and Development (OECD), which is an intergovernmental economic organisation.
OECD identified an unusual trend of 'very high' price rise of commercial and residential properties in Canada and Sweden. A significant change in price trends and the market slowdown was observed in the UK, post-Brexit. The report also indicates a point of inflection that the UK property market could encounter, given the market inactivity prevailing throughout 2016. Though prices did not fall last year, however, it might soon happen as consequence of price corrections for the revival of property sales. This is supported by the fact that the UK market had seen a noticeable decline in new homebuyer-inquiries and new property launches. OECD further said that lower property prices would not affect the country in case the load of price adjustments is borne by foreign investors.
What does this means for real estate in India?
OECD is monitoring the effects of a stronger dollar on emerging economies including India. It is believed that under the leadership of President Donald Trump, the Indian markets might also see volatility in currencies particularly across Asia Pacific Region. Nonetheless, it may be too early to make any assumptions.
The Indian government, with its new regulations and policies, seems to be equipped to tackle the situation.
The demonetisation move set the stage for transparency in the system and many homebuyers were under the impression of a price cut. Real estate amid speculations is hit the hardest and trend watchers suggest that for the market to revive, it may take another quarter or two. Since unaccounted money and cash transactions are expected to take a backseat, price correction seems to be an unlikely affair.
Goods and Services Tax
Similarly, the GST has refined the overall system by streamlining the taxation system and imposing a higher service tax on buyers. This implies an inevitable rise in properties. Ankur Dhawan, Chief Business Officer, PropTiger has said that GST will increase cost of under-construction properties for buyers if rates are higher than current applicable service tax rate of 15 per cent. For states where VAT is not applicable yet, state GST will be charged.
RERA (Real Estate Regulation and Development Act)
The implementation of RERA will impose strict control over the sector. The regulation would ensure a strong control over unscrupulous business activities that was breeding corruption and black money hoarding. Housing demand could see a rise but only after a brief spell of a stable market.
Rate cuts in home loans
Following a directive from the central government, most of the banks across the country have reduced lending rates for home loans. It could be an important factor in encouraging demand for housing.
All the above events had created an apparent slowdown in the market. However, these announcements may help revive real estate in near future as pent-up demand will start showing, thanks to prospective buyers willing to reinstate faith in the sector. Even though prices may rise, there are takers for a cleaner real estate. Analysts believe that the slowdown is temporary.