There is a sense of recovery in the real estate market, as the second half of 2016 saw a revival in sales and this trend is likely to continue in 2017. At the same time, the completion of several ongoing projects and various regulatory changes, will boost credibility and provide a much-needed course correction for the real estate sector, maintains Rajeev Talwar, chairman of the National Real Estate Development Council (NAREDCO), in an exclusive interview with Housing News.
Q: 2016 was an eventful year, with a number of policy and regulatory announcements. What impact will these developments have, on the real estate sector, in the short-term and long-term?
A: The policy reforms in the past couple of years, will augur well for the sector’s transformation. The Real Estate Regulation Act and the authority, will bring accountability and responsibility in the market. This will boost credibility and transparency in the sector. Reforms such as demonetisation, will affect the secondary market, where the use of unaccounted wealth is rampant. The gap between the market rates and the circle rates, will reduce further.
Thus, in the short-term, there will be a course correction and developers will focus on completing their existing projects. Buyers, at present, have turned cautious and have started looking for only those projects that are nearing completion. In the long-term, the various reforms will pave the way for further growth of the sector. These have the potential to boost the sector’s credibility and attract more investments – foreign, as well as domestic institutional funding, at a time when funding is the need of the hour.
Q: The year 2016 also witnessed subdued sales. Do you anticipate that sales will improve in the next two to three quarters?
A: I do not completely agree that sales have been subdued. The second quarter of 2016 witnessed a reversal in sales trends. Going by the current momentum, it is likely that sales will improve in 2017.
Moreover, responsible development companies are focussing on completing their existing projects and are trying to hand over the possession of the properties.
Thus, 2017 will probably be the year of completion for numerous projects across micro-markets. This will have a ripple effect and will result in attracting more buyers towards the market.
Q: Do you see more launches happening in the first half of 2017 than in the second half of 2016?
A: Unlike in the high-growth period, before the global financial crisis of 2008, where many foreign funds entered India and invested in multiple real estate projects, assuming that there will be a long and sustained period of price hikes and healthy returns, the current phase is that of limited participation by a few large but focussed funds (domestic as well as foreign).
Hence, project launches will remain muted, over the next two to three quarters. Moreover, development firms are now focussing on their existing projects.
Q: In what direction will property prices move, in 2017?
A: The past two years have been tough, for the real estate sector and prices have touched new lows during this time.
As a result, prices are only likely to increase across some key cities in 2017, while other regions will see more stable prices. This will be complemented by a number of reforms that will make the transactions fair and finished properties more valuable.
Consequently, the image of the sector will improve and will help in further boosting prices.
Q: A number of states are already working to put in place their real estate regulatory authority. What are some of the challenges that you foresee with this development?
A: We have always welcomed the real estate regulation. On the whole, the Real Estate Act will promote the development of a responsible and transparent real estate sector in the country. While this will hugely benefit the customers, it will also make all the stakeholders including developers, brokers and development authorities, accountable for time-bound action and approval of projects.
Q: What do you expect for the real estate sector, from the upcoming budget in February 2017?
A: We are hoping for several measures in the union budget, which will be a landmark one after the demonetisation exercise:
- All housing projects (at least upto 1,000 sq ft carpet area in metros and 1,500 sq ft carpet area in other cities), should be given infrastructure status.
- All incentives provided under the UPA-1, should be indexed to the current year and the limits raised, proportionately. These would be applicable to Sections 80C, 24, 54, 54B and 54F of the Income Tax Act.
- Other sections that need to be looked into, are Section 24(a), Section 22 and Section 194-IA.
Q: Should consumers wait for the Real Estate Regulation or invest now?
A: Any time is a good time for buying real estate. One should not wait for any further correction or for the regulation to be enforced in the states. Prices are already discounted. There are plenty of options available in the market that suggest that buyers can enter at any time.
Q: Development firms are struggling to complete their existing projects, on account of shortage of liquidity. Do you expect the scenario to be better in 2017?
A: As I mentioned earlier, the completion of a few good projects in the first half of 2017, will lead to a chain reaction, with others also striving to complete their pending projects. This could attract more funds and strengthen the market. The infusion of capital, will speed up deliveries.
Q: What is your advice to home buyers who are facing delays in obtaining the possession of their apartments?
A: The primary responsibility of all developers, is to give the apartments booked to the buyers, without any addition to the prices at which they were booked.
There may be several reasons for delays. In many cases, delays are not just on account of a faulty approach of the development firm but also on account of external factors, such as lack of funds, delay in getting the necessary building approvals, etc. So, my advice would be to stay invested in those projects that are nearing completion. For those, where construction has not started, buyers should seek clarification from the development firm and if need be, shift to another viable project that will see the light of the day.