New Delhi, December 21, 2016: The year 2016 will go down in the history books of the Indian real estate sector as one of the most transforming years for the country’s real estate division where there were big announcements along with a bit of bumpy rides here and there. Being one of the prime contributors towards our country’s Gross Domestic Product(GDP) and employment generation, a lot is always expected out of this sector for the economic growth. This sector alone is responsible for being a user for over 30 other allied industries and sectors; and as we bid goodbye to 2016 and gear up for 2017, a lot has changed since the beginning of this year, where several major announcements were made and infrastructural developments came out as the highlight. Much was delivered during the course and a lot still remains in pipeline, where real estate sector will once again be an important contributor in 2017 as well.
Year of Key Decisions
2016 turned out to be a year where major policy decisions and implementations came into being. Major bills such as RERA(Real Estate Regulatory Authority) and GST(Goods and Services Tax) were passed during the year, allowing the sector to become more transparent and systematic. “The passage of GST and RERA has been one of the biggest highlights of the year that is sure to benefit the sector in the long run. Monitoring and supervision of transactions, clarity of tax structure while buying property and transparency in the sector, were the desires of every buyer that has been finally answered by the passage of these two bills especially. By the end of second and third quarters next year, we will have various states implementing RERA with a regulator on board. Even GST, which has been postponed, will become operational by the end of third quarter next year”, states Avneesh Sood, Director, Eros Group.
Apart from the passage of GST and RERA, Union Budget 2016-17 saw major reliefs for the affordable and rental housing segments in the country. Even the Reserve Bank Of India(RBI) slashed the Repo Rate by a total of 50 basis points during this calendar year, thereby pushing the banks to reduce its lending rates for the potential buyers and helping the demand to move forward. Work on the infrastructure front saw a major momentum gain as several cities across the country witnessed Airport upgradations, Metro becoming operational, several expressways and roadways opened for the public and so much more. Out of the 98 Smart Cities declared, 60 cities have been already finalised and they have begun the groundwork for the same. Thus, decisions for the infrastructural development in the country will allow the untapped real estate regions to grow vertically in 2017. “For the realty sector to grow and contribute, it is imperative that the government supports it directly and indirectly. Through the passage of RERA and GST, we saw a direct support that will be immensely beneficial in the long run. And while analysing the indirect contributions; Union Budget was very crucial. Announcements such as raising the HRA deduction by Rs. 36,000, increasing the ceiling on tax rebate by Rs. 3,000 for people earning less than Rs. 5 lakh annually, DDT removed from REITs, a total of Rs. 97,000 crores announced for the development of minor and major roadways, developers not to attract any taxes on profits arising out of affordable housing developments and many other decisions. These decisions are sure to benefit the sector indirectly and will promote the government’s plan of Housing for All; where private developers have already begun to contribute heavily. Also, we are projecting the upcoming RBI’s policy review and Union Budget to be populist, and this will allow this sector to function more smoothly in 2017”, explains Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz.
Speaking about 2016 being a year of key decisions, one just cannot skip the date 8th November from the picture. Demonetisation came down as a surprise for the country and real estate sector was no exception. Stakeholders of the sector have been jittery since the news came out first. Few things have become certain, secondary market has completely dried and primary market now looks more secure, thus making this sector move towards refinement. “There are a few misconceptions pertaining in the market due to demonetisation such as prices to fall, demand to shatter and project delays to become prominent. As a matter of fact, real estate stakeholders and buyers should understand that in the current scenario, demand for good quality development by reputed developers with a strong delivery and finance history is bound to increase. It was anticipated that the investors’ market will come to a halt, due to which people are perceiving the market as gloomy. In reality though, market is performing absolutely normal, as primary sales are taking place at usual pace, which in the long run will appreciate property prices. Projects shouldn’t get delayed as not all the work requires labour force, but machinery, and hence smart developers are tackling the situation of cash crunch by changing the type of work till liquidity stabilises in the market. Finally, with RERA to become operational in most states by next year and effect of demonetisation making transactions digital, we will automatically observe a much transparent realty sector in 2017”, avers Kushagr Ansal, Director, Ansal Housing.
A Look at the Performance
Performance of the realty sector in 2016 was a mixed bag, where project launches saw a dip by almost 6 percent year-on-year with NCR realty market witnessing the biggest fall; but possessions offered increased drastically by a staggering 15 percent. With the domestic demand not being up to the mark due to prices still being relatively higher, unsold inventory piling up and EMIs not coming down proportionately, developers shifted their focus towards delivery of units and clearing off the remaining stock rather than launching fresh units. “Over the last few years, especially from years 2008-2012, massive project launches happened across the country, the possession of which was due by this year or the next. This coupled with the sales not performing up to the mark, developers were provoked to focus on the delivery part. With RERA also passed, it was crucial that developers stood up to take the responsibility of delivering on time. This can be regarded as a boom for the sector, as more possessions mean better performance and stability in the sector which further attracts potential buyers. As the inventories get cleared and possessions take place, sales will pick up pace and we are projecting 2017 to break the three year sales dip jinx and outperform several good years this sector has observed in the past”, says Rakesh Yadav, Chairman, Antriksh India.
A major sales chunk in 2016 came from the affordable housing segment, where developers across the country are focusing towards the government’s decision of Housing for all. NCR realty market was the top performer in offering affordable housing units, where for instance, Gurugram(Gurgaon) is ready with almost 50,000 units in pipeline to be delivered by 2021. Moving slightly up the ladder, even the mid-housing segment performed well in terms of sales and possessions both, where regions like Noida, Ghaziabad and Greater Noida scored above others in NCR real estate market. Citing a few examples and to begin with; realty major, Eros Group achieved a revenue of INR 700 crores and managed to bag sales of 1,700 units in 2016. NCR realty major Mahagun Group scored high in terms of both, sales and possessions. The company offered possession of 4,587 units and bagged 9,462 bookings during the calendar year. “2016 has been a stable year in terms of realty sector’s performance as possessions and sales happened silently and uniformly throughout. With banks reducing lending rates, property prices coming down to its lowest and developers focusing upon building and delivering budget houses, the demand for sales was well met, considering the slowdown pertaining in the sector for past few years. Possessions on the other hand saw a major thrust on account of RERA being passed and delivery becoming the prime motive of every developer. Next year might turn out to be even better for the sector as the upcoming Union Budget is expected to offer major relief for the buyers. Even interest rates might come down to as low as 7 percent that will allow the sales to multiply. With numerous projects across the country reaching into the advanced stages of construction today, possessions will yet again be a highlight for 2017”, elucidates Dhiraj Jain, Director, Mahagun Group. On the other hand, Ajnara India Ltd. offered possession to about 2,000 units with a splendid sales number of 10,950 units during 2016 and a turnover of over INR 353 crores. “Getting homes delivered on time is the best sight for any buyer and this allows a company to generate credibility which is most helpful during slowdowns like now days. In 2016, developers had very thoughtfully shifted their gears from project launches to deliveries. The kind of policy level decisions and implementations that took place this year has reshaped the Indian realty sector and assisted the developers to focus on delivering. 2017 looks all set to offer wonders to the stakeholders of this sector as more domestic and international demand is ready to come up by the middle of next year, with all eyes on the Budget announcements, where chances are high of a common man’s budget”, shares Ashok Gupta, CMD, Ajnara India Ltd.
Amongst other strong runners in 2016 were NCR realty majors Gulshan Homz and RG Group. Gulshan Homz managed to offer possession of 373 units this year along with 493 units sold. With a turnover of INR 300 crores approx. and 764 units sold, RG Group had a good 2016 and is forecasting an even better 2017 for the Indian realty sector in general. Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group comments, “With all the unnecessary negative hype about the slowdown in the sector; at a macro level, 2016 was actually much better than many years before it. This year we saw a realty sector favoured Union Budget which was later well complimented by the passage of RERA and GST. RBI played its part seemingly well by reducing the repo rate by 50 basis points this year. Banks also gave some cushion this year by reducing the interest rates by a fraction margin twice this year. All the gains from this year will be carried forward to 2017 that will allow the sector to perform even better.”
What’s in store for 2017
2016 was indeed a year of happenings especially for the realty sector. The focus now moves to 2017 where again a lot is expected out of the government to offer some relief for the sector and its stakeholders. “2017 will be the year of implementation and digitisation for the realty sector. RERA and GST only saw their passage in 2016 with just a handful of states drafting the rules for the same. But in 2017, we will definitely witness regulators in states and RERA will be fully functional. GST will come to a conclusion by third quarter of the calendar year and chances are that this sector might fall in the third slab, i.e. 18 percent. GST becoming operational will allow the realty sector to become much refined and transparent. Finally, with the country planning to become cashless, realty sector and the government will definitely plan to digitise the entire mechanism, from furnishing details to sales to payments to registrations. We might even witness government subsidies or benefits if real estate sales and registrations go digital”, believes Vikas Bhasin, MD, Saya Group. Adding further, Ashwani Prakash, Executive Director, Paramount Group says, “Unlike previous several years where realty sector used to get completely ignored, 2016 got pretty much the best out of everything. From infrastructure to key policy decisions to so much more. Although, clarity over acquisition of land and a long pending desire of entitling this sector with the industry status is still pending. 2017 looks like the year where these demands of the sector might be met and few income tax exemptions or incentives for the people might get introduced in the upcoming Budget session. This, if coupled with reduced interest rates, will allow the realty sector to function fluently and perform even better than 2016.”
Looking into the core angles of Indian real estate sector and analysing how this year went and what’s in store for the next year, Kaushal Nagpal, Co-Founder, BookingKAR concludes, “If we say 2016 was a subdued year for Indian realty, most among us would agree. We could hardly see any traction during Navratra & Diwali, which is considered to be the most peak time for transactions. Whatever transactions in group housing segment were seen, were from the end users looking for their dream homes. Majority of them were from consumer durables, PSU & IT sectors. With the existing sentiments, 2017 looks no different. Indian real estate market is going through a rough patch and the only respite can come from a sharp decline in interest rates. RERA would gradually build confidence among buyers. We strongly feel, post interest rate cut there would be a substantial demand for residential group housing. This would actually be a good time for end users to choose from several ready to move in projects, as they will save on the money spent towards service tax. As per the demand analysis by next year post Budget session, even the broker and consultancy services will move in the vertical direction.”
Corporate Comm India(CCI Newswire)
