Tag Archives: Indian Economy

Budget compensation for demonetisation hit realty

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Can the expected budget bonanza compensate the demonetisation hit Indian real estate market?

India Budget, India Finance Minister, Indian Fiscal Policy, India Monetary Policy, Union Budget 2014-15, India real estate news, Indian realty news, India property market, Track2Media Research, Track2Realty“The sector has suffered badly due to the demoentisation and our business have been forced to go through the worst cycle. The recent interest rate cut promises that the government might give some extra sops to the home buyers but my concern is about the larger interests of the business. Can the government compensate the real estate business that has been hit due to demonetisation with a home buyer friendly budget,” questions a developer in Gurgaon while requesting anonymity.

This is not something that only this developer is asking. As a matter of fact, within the built environment of Indian real estate a large section of analysts privately admit that the demonetisation has done more damage to the real estate business than even the Lehman crisis. Some call it home-grown Lehman crisis while others term it as self-inflicted money trap.

The larger issue today is: Can the Union Budget 2017-18 change the market dynamics? Can some interest reduction and other sops uplift the home buyers’ mood and market simultaneously. The opinion is divided but what can be vouchsafed is the fact that budget is being presented immediately after hard hit on the realty sector with demonetization. It is hence being seen as either a budget with major relief or more tough days ahead.

Demonetization hit real estate & budget expectations

  • Demonetisation has hurt the Indian economy in general and real estate in particular a big way
  • Some call it home-grown Lehman crisis while others term it as self-inflicted money trap
  • The housing sales have come to a standstill and new launches have stopped
  • The rate cut has thus far not shown any sign of increased market transactions
  • The Union Budget can at best reduce interest rate and encourage home buying, but the ground realities of economy and job market discouraging 

Kaizad Hateria, Brand Custodian and Chief Customer Delight Officer, Rustomjee Group maintains that the real estate sector has always been upbeat with the upcoming budget and this time too one is optimistic about the future. Real estate contributes 12% to the GDP, second largest after agriculture. Real estate supports more than 150 ancillary industries. So, any challenge to real estate is challenge to the economy and any opportunity for real estate is an opportunity for the economy.

“2017 is a year of positive reforms. This year we will see the after effects of demonetisation – an axe to cut out black money, RERA – real estate regulatory being formed – a watch dog, GST being introduced – tax simplified and finally the implementation of the new development plans – a well planned city. All of these leading to more transparency, reliability, timely development and thus benefiting the consumers at large,” says Hateria.

Parth Mehta, Managing Director, Paradigm Realty categorically says that demonetization has impacted sales in real estate sector. He demands that there should be some measures in the upcoming budget, for example cut in the tax rates for middle income groups which will lay extra money in people’s hands. “Also, stamp duty reduction can give some breather. Several government approvals should be executed appropriately. Single window clearance has to be introduced.”

Vivek Mohanani, Joint Managing Director of Ekta World admits that post the announcement of demonetization, the real estate sector has seen a temporary hit. However, these changes are surely in the larger interest of the sector and its customers. It will bring about more transparency in the sector. The upcoming Union Budget announcement is expected to bring cheer to both buyers and developers.

“The real estate prices are predicted to increase marginally, as with demonetization in place, stringent rules & regulations are to follow the realty sector in the year 2017 which will give a raise to the sector. There is also a high possibility of the execution of GST in the budget 2017-18, which will relieve the buyers from paying multiple taxes, in turn boosting the purchase of properties,” says Mohanani.

Analysts suggest that with Interest rates coming down sharply at the very beginning of 2017, the demand for end use home buying will not only revive but also catch steam over quarters of 2017. Reduction in interest rates not only reduces interest cost but also increases affordability. The budget should hence focus more on the end user home buyers.

The moot point, however, still remains unanswered as no one would like to address it on record. The state of Indian economy does not allow the Union Budget to compensate the real estate sector for the hit that it has taken with the demonetization. The long term reforms are only projections as of now, and the short term losses can hardly be compensated with the Union Budget 2017-18. The developers nevertheless are living with hope and prayer.

By: Ravi Sinha

Was rate cut precursor to more sops for realty in budget?

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: The rate cut ahead of Union Budget 2017-18 has raised hopes that the policy makers are working on more bonanza for the homebuyers.

Union Budget, Union Budget 2016-17, Finance Minister, Housing demand in Budget, Fiscal Deficit, Monetary Policy, Repo Rate, NRI investment, India real estate news, Indian property market, Track2Realty, Budget disappoints real estateThere has not been any precedence of major interest rate cut ahead of Union Budget. On the contrary, the major financial policy decisions are put on hold or deferred ahead of the budget to make it announce during the budget speech of the Finance Minister. However, the substantial interest rate cut ahead of the Union Budget 2017-18 this time around has pleasantly surprised the market and the home buyers.

The analysts are even calling the year end speech of the Prime Minister Narendra Modi that led to the banks cutting down the interest rate as mini-budget. It is hence expected that the the rate cut has only been symbolic and major substantial gains are in store to be unlocked with the Union Budget.

Was the rate cut really a precursor to more sops for realty sector in budget? At least the larger stakeholders of the Indian real estate would like to believe this. Kaizad Hateria, Brand Custodian and Chief Customer Delight Officer, Rustomjee Group says yes it could be a precursor to more sops for real estate sector. According to him, the developers are expecting regulation of norms which will enable seamless transaction for customers and stakeholders.

“For example, clarity and uniformity in DCR norms, single window clearance, time bound approvals, cluster redevelopment schemes to be more attractive, FSI and TDR norms and seamless flow in stamp duty taxation. We shall expect sops in clarity for the benefit of the customer. With financially disciplined developers having focus on its customers and the timely delivery of their projects, consolidation within the real industry is what we expect in the year 2017. Also, with the implementation of RERA, we foresee confidence coming back among buyers,” says Hateria.

Major budgetary bonanza for home buyers?

  • The interest rate cut that followed with Prime Minister’s year-end announcement indicates major bonanza for home buyers in Union Budget
  • No precedence of sudden rate cut ahead of budget suggests the need for feel good factor was immediately felt while major bonanza is being worked out
  • Tax incentive to home buyers clearly indicate the government wants to reach out to middle class home buyers post demonetization
  • Finance Ministry sources claim the specifics for the home buyers in budget still being worked out   

Parth Mehta, Managing Director, Paradigm Realty says he is pretty hopeful of more policies like tax benefits for affordable housing, home loan interest rate reductions, relief in income tax for individuals.

Vivek Mohanani, Joint Managing Director, Ekta World also believes that the year 2017 will definitely be a good year for the real estate sector, helping the sector with an upsurge with the changes that have taken place in the current financial year.

“The coming year is expected to write a new growth chapter in the realty sector which include the reduction in interest rate, increased FDI, and increase in loan portfolios. With the government giving sufficient interest rate cut precursor, the realty sector is definitely going to see buoyancy in the Union Budget,” says Mohanani.

There are reasons to believe that the policy makers are in a crisis management mode and hence the rate cut was immediately announced. Had it not been the case this could have been put on hold and announcement would have been made in the budget speech. However, the government found it deemed to offer something instantly while other sops for the home buyers were being worked out.

The sources with the Finance Ministry also confirm that the government is also working out the modalities to provide higher tax incentives on home loans to boost the real estate business that has been worst affected with the demonetization. The sources even claim that the government cannot afford to completely ignore the issue now since it goes against the oft-repeated commitment of ‘Housing for All’.

A tax incentive post the demonetization that has made the banks flush with funds would send a strong message to the market. The tax concession is the only way out to not only keep the sector back on track that contributes significantly to the GDP (Gross Domestic Product) but also reach out to the middle class Indians across the country.

Thus, it could be vouchsafed to say that the rate cut being referred as the mini-budget in popular parlance has been the precursor to substantial home buyer bonanza package in the Union Budget 2017-18.

By: Ravi Sinha