One year since demonetization, Impact on Real Estate

0

The Indian real estate sector has been facing significant challenges in the past few years including slow movement of inventory, delivery and various other issues. With a lot of measures, the sector was clearly pointing towards a slow and gradual, but sure recovery when last year Demonetization happened. The aim of demonetization was to curb the use of black money, but the cash crunch it caused contributed to significantly lower real GDP growth in the subsequent quarters. However, the more significant blow to the economy was dealt by real estate policies that followed demonetization

While the economy was recovering from demonetization, implementation of Real Estate Regulation Act (RERA) and the Goods and Services Tax (GST) caused further confusion. Globally policy changes are done over a period of time so that there’s enough gap to implement the same, however last 12 months saw three major scenarios – Demonetization, GST and RERA implementation which meant that for almost 6-8 months there were disruptions in the normal course of work. It also contributed more to the economic weakness that we are witnessing currently and created confusion in all the sectors which hampered growth more so in real estate.

The primary residential market in certain cities where most transactions are financed through legal channels of banks and housing finance institutions providing home loans to buyers didnt saw significant impact however the market sentiment made people delay their decision making. Only in projects where cash component was involved and those in the secondary market saw a significant impact.

RERA  saw most developers go into wait and watch mode and not launch new projects  and the implementation of GST without having the necessary infrastructure had a negative impact on the industries connected to the real estate sector.

Having said that, last one year also saw transparency and accountability coming in the sector which has led to more institutional investments coming through. (Read PE shifts focus back to Real Estate). All the changes last year also meant market correction & rationalization at some places and hence the current levels are more steady, stable and should start seeing an upturn in next few months.

The implementation of RERA will see consolidation in the industry where either the unorganised players with decide to shut shop or will align with the RERA structure adding more credibility to the industry. From a consumer’s perspective, due to demonetization, there were attractive plans, discounts etc on offer and hence customers were able to get the best on table. With RERA they can be assured of delivery happening as per the commitment and hence the confidence levels are bound to go up.

The next few months are going to exciting for the industry as there’s clarity in the system, attractive pricing is on offer and new projects (Check the most awaited pre launch of Sobha at www.sobhapristine.co) are being lined up by developers.

Summary
After 1 year: Impact of Demonization
Article Name
After 1 year: Impact of Demonization
Description
Real estate scenario one year of after demonetization
Author
Publisher Name
Pin Click
Publisher Logo