By: Ravi Sinha
Track2Realty Exclusive: To say that the Indian business community in general and the real estate developers in particular desperately wanted a change in the business outlook and hence change in the government would be stating the obvious. For the last couple of years they were cribbing about policy paralysis, inflation, and negative sentiments, and hence the developers are visibly elated with the change of guard at the Centre.
The verdict of Lok Sabha polls 2014 has now given them reasons to look up to the new government at the centre which has got a huge mandate on the promises of curbing inflation and leading to economic turnaround. The D-Day on May 16 has indeed changed the mood and outlook of the business community across the country, and the developers across the country are counting on the blessings to come.
The optimism of the real estate sector is not based on sheer emotions, but the grounded reality and realisation that if the new government has to do a turnaround of the economy, then housing sector has to play a key role. Moreover, some of the key pending policy decisions like the implementation of Real Estate Investment Trust (REIT) also promises to not only revitalise the commercial real estate but also open the floodgates of funding opportunities. There is a growing realisation within the built environment that the new style of governance will meet the twin objective of the sector-bring an end to policy logjam and deal with the funding issues for the developers.
The developers are so positive with the prospects of the sector with new government at the centre that some of them are even looking up to the heydays of 2007-08. The real estate, like the rest of the business community, has reacted positively to the news of NDA forming the next government. This sentiment is all visible on the market dynamics as well. Sensex has already breached the 25,000 mark and the Nifty breaching the 7500 mark is seen as the confidence of the investors in the new government.
Anshul Jain, Chief Executive, DTZ India asserts that with a majority stake in the government, it is expected that the Parliament will function smoothly with lesser number of walk-outs by the opposition. This will translate in better decision making and will improve the sovereign ratings of India which will be good to attract foreign investors to India Inc. All this is good news for India’s real estate business as demand is expected to pick up in the latter half of this year.
“The corporate real estate alone could clock in 10 million sq ft of demand by end of 2015. Next 5–6 quarters is expected to be the game changers. Availability of funds will ease and interest rates are expected to come down as inflation cools. This will have a direct impact on the supply side of the real estate. With demand improving, the current stock of office space might not be sufficient to cater to the demand and hence, rentals could be under upward pressure. With the era of coalition government over, we hope that the term ‘policy paralysis’ is a thing of the past now,” says Jain.
Anshuman Magazine, Chairman & Managing Director, CBRE South Asia also vouches that the election results will certainly improve sentiment in the real estate market. He says the formation of a stable government not dependent on coalition partners will hopefully mean faster decision making and economic reforms.
“If GDP growth picks up, one of the early beneficiaries would be the real estate industry. However, the economic fundamentals have to be tackled; infrastructure projects implemented with a sense of urgency and housing mortgage interest rates have to decline before we would see any significant impact on the real estate market. Overall the election results will certainly improve sentiment in the real estate market,” says Magazine.
Sachin Sandhir, MD, RICS South Asia categorically says that the country has voted for a stable government at the centre by giving a clear majority to a single party. While there may not be any immediate impact on the economy, the electoral verdict signals a clear mandate for the growth of housing and construction sectors in the country, and will boost employment and growth in the next 12 months period. Hopefully, the new government will work towards the betterment of the sector by removing the regulatory bottlenecks in the way of project approvals and bring pending reforms such as real estate regulation.
“The housing sector particularly is facing a number of challenges – the biggest of all is the subdued buyer sentiment. Prospective home buyers have become wary of entering into the market on account of problems such as high retail inflation, lack of regulation, faulty builder-buyer agreements favouring developers, rising property prices and uncertainty over the completion of a number of projects. This has resulted in drastic drop in sales across our cities. Hopefully, the new government will try to bring back consumer confidence into the market by removing these impediments,” says Sandhir.
Rahul Gaur, CMD of Brys Group makes an important observation when he says that the new government will have to move ahead of election rhetoric and bring about certain tangible results, as the patience of the business community and nation is running short. According to him, an economic turnaround is the only way the new government can send across a positive signal to the nation, failing which the huge mandate will have no meaning.
“It is alright if certain contentious issues like the retail FDI etc are put on the back burner during the elections as understanding about the benefits of FDI is not that high in this part of the world. But what the real estate and India’s business community at large is waiting is not what the government preaches but what it practices. Some bold measures to attract the foreign investment, renewed thrust on the infrastructure projects and the incentive to the housing sector is the only options with the government that can lead the country into a new era of growth driven economy,” says Gaur.
Gaurav Gupta, Director, SG Estates says that with clear mandate and a stable government he now expects a fresh wave in real estate industry with all prospective buyers in wait and watch mode coming forward and finalising their purchase decision. To make it an interesting proposition for buyers, investors and developers, the new government may look into low cost funding availability and better infrastructure.
“Streamlining the approval process will result in quicker land acquisition and faster approvals. Implementation of proposed Goods & Service Tax framework; tax benefits for buyers/real estate developers to induce activity in real estate industry which is suffering from liquidity crisis and inventory overhang will also bring a wave of enhancement. It is expected that the government will take immediate action on delays on approvals of Height and Environment as well,” says Gupta.
The Indian real estate seems to be realistic in its expectations with the new government. At least on the face value no one is expecting an industry status in the immediate future; though easy access to finance is definitely on the wish list. But what is on the top of the wish list is the fiscal management & curbing inflation that can lead to revival in demand. Thrust on the infrastructure is the second most important wish list which is expected to lead to growth. Above all, the sector seems to be unanimous that the new government must take concrete measures to streamline the processes that give them time-bound clearances.
