This Is What You Should Expect From Real Estate Sector In 2017
As far as the realty round for the year 2016 and the expectations for 2017 are concerned, the biggest development occurred in the later part of the year 2016 which is demonetisation that had a tremendous impact across sectors. Apart from demonetisation, other certain important developments that took place including RERA (Real Estate Regulatory Act) and REITs ( Real Estate Investment Trusts).
Now with the arrival of REITs ( real estate investments trusts) to attract investments and ease of doing business in the real estate market, the demand may grow on the commercial market front. Also, India enjoys being the favourite outsourcing destination for global business companies like IT, manufacturing, food and health products, clothes, multifarious goods and products industries which need commercial and office space here and the demand for the same may all the more rise.
The Real Estate Regulatory Act (RERA) is likely to bring in transparency in the sector and may lead the sector to be able to attract more foreign direct investments (FDIs). RERA establishes the state authority and vests authority on the real estate regulator to govern both residential and commercial real estate transactions and by doing this, it shall improve the governance hold on the sector. Thus, reducing disputes and making the system more transparent.
The rule of RERA of depositing around 70 per cent of funds in a dedicated account shall ensure sufficient funds for the projects to speed up, get completed and timely delivery to the buyers bringing in more transparency. This is set to improve the feasibility of financing options available in the market leading to increased investments and propelling more FDIs and thereby making the system more efficient.
On the other hand, the impact of demonetisation on real estate sector can be divided in to two major categories — short-term and long-term. Looking at the current scenario, the short term impacts include a slight slowdown of sale and purchase in properties till the prevailing banking situation for people normalises but, once the things come back to normal, the long-term impacts may be beneficial for the end-users.
The market is basically having different segments like the primary and the secondary market. The secondary market is considered as the resale market. The impact of demonetisation may bring a slowdown in the resale market or secondary market and it may give a boost to the primary market.
The real estate sector may also be divided into the organised sector and the unorganised sector. Here also the impact of demonetisation shall be that it may bring more transparency in the organised sector and shall be a blow to the unorganised sector bringing its breakdown.
After the demonetisation step having been taken, the fund flow in banks is increasing tremendously. This will have a positive effect as far as banks giving housing loans are concerned. It is expected that the bank housing loans' interest rates may fall due to increased fund flow in banks and getting the bank housing loans may become cheaper. Positively predicting such a scenario, this may prove beneficial for the buyers and shall inculcate more interest in purchasing property. The low-interest rates will create more enthusiasm in buyers and more people would opt to buy in the situation.
As far as the necessities of the masses are concerned and to realise the mission of 'Housing for All' and coming of greater transparency, now the concentration shall be more on building mid-segment and affordable housing which is the need of the hour. As metro cities become the major job zone for all levels and masses are rushing to cities from far of places with each passing day, the demand for mid-segment and affordable housing is increasing manifold every day.
Moreover, demonetisation will also bring be more transparency in the deals, boost the primary market, slowdown the secondary or resale market, and the real estate market shall move further towards becoming more organised.
The article is written by Parveen Jain, President, National Real Estate Development Council (NAREDCO) & CMD Tulip Infratech.