Revving up revival

Vinod Behl

Notwithstanding its patchy and  tardy implementation and initial disruption caused by it along with other associated key reforms like GST, the favourable changes brought in by Real Estate Regulation & Development Act (RERA), can not be underplayed.  

RERA has contributed significantly in terms of boosting demand and sales of residential real estate by bringing in fair play and transparency in transactions. The empowerment and protection of consumers under RERA, has brought back their lost confidence to some extent, in turn providing momentum to the process of  real estate revival.

This is clearly evident from industry studies. According to a recent report by PropEquity, the housing demand in key cities rose by 8 per cent in March quarter of this year, in comparison to December quarter of last year, topping 40,000 units. The most supply- burdened market of Noida saw a record 31 per cent rise in sales in January- March, 2018 period as against the previous quarter. A PropTiger report puts the hike in home sales at 33 percent , to 80,000 units in 9 cities of Mumbai, Pune, Noida, Gurgaon, Bengaluru, Chennai, Hyderabad, Kolkata and Ahmedabad.

It is another matter that along with RERA, the credit for pick up in sales also goes to other enabling factors like stable prices, low interest rates and interest subsidy to homebuyers under PMAY and tax incentives provided to both developers and  homebuyers under affordable housing scheme.

The sharp fall in new launches over the past couple of years, has helped create supply-absorption balance, in turn cutting down unsold inventory (estimated by JLL to be 4.4 lakh units by end 2017)and boosting sales, leading to realty revival. As per JLL study, housing sales exceeded new supply by 5 per cent during the last two years in seven major cities of Delhi-NCR, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad & Pune. Against home sales of 2.44 lakh during 2016 and 2017, the cumulative new home launches were 2.33 lakh units.

RERA has helped in pushing home deliveries, ushering in a new trend of ‘Build & Sell’ In order to escape the stringent provisions of the Act, developers have been focusing on projects completion and delivery. The ready-to-move-in homes have been registering good sales across India. Besides safety of investment, buyers also get the advantage of zero per cent GST on ready homes. 

Along with RERA, the associated far-reaching reforms of GST and demonetisation,that have brought in financial discipline, f airplay and transparency into real estate, have boosted the confidence of foreign investors. Foreign investors, including PE and Pension funds are investing in a big way in real estate due to RERA, aided by FDI reforms. So much so that with Indian economy and real estate staging a gradual and sustained recovery, foreign investors are even picking up distressed projects to contribute significantly to the recovery of real estate. 

Considering that most of the incomplete housing projects were stuck due to fund shortage, the foreign fund flows to the sector, have helped developers line up a good inventory of finished projects that are selling faster.

The full  impact of RERA will be evident when homebuyers regain the confidence to buy under-construction property, without the fear of losing their investment.

— The writer is founder, Ground Real(i)ty Media, a real estate content consultancy