With the end of short term effects of these policy changes , we hope that 2018 might be the year of investors provided the long term benefits of the RERA and GST. Real estate saw upward trend in l 2017 after the storm of demonetization in 2016 . It was a setback for investors and buyers alike. But with passing time it was clear that policy changes such as demonetization , RERA Bill and GST has only benefited the reality sector by making it more transparent. Effects of demonetization, RERA and GST has given new standards of delivery, accountability and transparency. Willingness to pay for long-standing reputed developers will increase. Preference for ready to move-in properties that are hassle-free of any compliance issues. Completion of existing projects will be prioritized over launching new ones. Technology will also have good impact on the real estate sector. New smart buildings made with growing technology will help both building owners and buyers by improving performances and saving costs.
Stripping of currencies legal status is what is termed as Demonetization. It has been the long debated government policy now and has little or more impact on almost every citizens of our country. Effect of demonetization on real estate has been very much controversial with loads of romours and own speculations. But, lets have a look at the facts and statistics about its impact or reality market.
Most of the people thinks that it will help eradicate black money and will bring the much needed transparency which will build confidence and have the long lasting stability in the realty market. Our Hon’ble Prime Minister Narendra Modi has said that that over 5 lakh crore deposited with banks are not going to be kept idle and Banks will have to extend loans for all sorts of economic enterprises – for which they will have to bring down their interest rates, which seems to be a good sign for realtors. With falling interest rates property market will become more attractive.
Also since all the well organized companies choose to do their transactions through legal channels and financial means using bank loans and emi it will have a very positive impact on them. For those who used to do their transaction in cash will be forced to choose cheques and other legal payment modes which will eventually generate more confidence in buyers and more and more people will start investing without much of worries.
In short Demonetization is another big step along with Real Estate Bill and other government policy towards greater transparency and better customer confidence. The sector is also expected to receive more attention from foreign institutional investors given the improved transparency and better systems being in place.
The amendment in Benami Transaction Act is a step in right direction to improve the overall confidence of the real estate buyers. All real estate transactions shall be in the name of the actual owner who is paying the amount.
Real estate has always been a preferred investment option for several Indians like other investment options such as gold. Choices of investments may differ but investors in all financial categories follow more or less the same pattern or have similar preferences. Not just wealthy Indians, even middle-class and lower-income groups dream of owning a home or investing in real estate property and are keen to save all through their lives to buy properties.
According to the recent report, the real estate sector will be a preferred option even in the next 5-10 years. In the last ten years, the billionaire count in India has increased by 333 percent while the global growth was just 68 percent, which points to the growth of wealth in India. And these people preferred to invest in real estate sector. The average number of residential properties owned by wealthy individuals stands at 4, while the global average is 3.7, thus highlighting Indian’s inclination towards investment in the realty sector. One-third of wealthy Indians increased their asset allocations to residential real estate over the past decade.
With Real Estate Bill becoming a realty, business in real estate will not be as usual. Home Buyers has many reasons to cheers as The Real Estate bill, whose main focus is to protect the home buyers rights makes registration of projects essential, including those that have not got completion or occupancy certificates. Registration will require builders to set aside funds collected from buyers and pay interest in case of delays. Hence, The real estate bill would force the Builders and Developers to finish construction and development work quickly as registering existing projects might delay them further.
The Real Estate Bill which has been passed recently by both the houses of parliament is ready to receive the assent of the President says that Builders have to deposit 70% of the amount collected from buyers in a separate account to cover the cost of construction, including land. Developers will also have to pay the same interest rate for any delays on their part as buyers do when their payments to the builders are late.
Real Estate investment has always provided a sense of security and emotional attachment to property buyers and investors. Real Estate is far less volatile than other growth oriented asset classes and financial institutions lend money easily to a real estate buyers. Real Estate is one of the very few asset classes which has beaten inflation consistently in the long run. Government’s commitment on Housing for All and Real Estate Bill to make it a realty will certainly help to strengthen the morale of realtors in coming days.
Imminent rate cuts by banks looks a real possibility now that Governor Rajan has made it clear that the cost of funds for banks have fallen substantially.
As usual banks have been rather reluctant to pass on the rate cuts to the end consumer in spite of couple of rate cuts by the RBI this calendar year. However, it is just a matter of time before banks are forced to pass on the rate cuts. Thousands of borrowers are patiently waiting for reduction in their monthly EMIs. Even corporate India has been very vocal on the impending rate cuts by the banks. On the ground economic activity will get a leg up when the borrowing costs comes down. Improved economic activity will result in higher income and will eventually boost the disposable income of the people.
Real Estate space should be one of the biggest beneficiary as and when the rate cut trickles down the system.
Now that the Governor himself has made his stand loud and clear, banks will have no option but fall in line by cutting lending rates, sooner rather than later.
Reference – Newspaper Link