Real estate takes a year to recover from currency ban

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PUNE: The real estate sector took a full 12 months to recover from the effects of demonetisation, data shows.
Even as the sector looks to settle down in the post-Real Estate Regulatory Authority Act and post-Goods and Services Tax world, realtors are raising the demand that the Union budget, to be announced on Thursday, give them additional sops, if the government wants to meet its ‘housing for all’ goal by 2022.

Registration data compiled for the Pune region shows that the number of property registrations had begun to grow in a sustainable manner only from November last year. Though there were a couple of months of uptick last June and July, the growth spurts were caused by a pre-GST push by developers, who floated several offers to entice customers.

When Prime Minister Narendra Modi announced the demonetisation of the Rs1,000 and Rs500 notes on November 8, 2016, property registrations fell by a whopping 20-30% for five straight months, till the following March.

There was some semblance of recovery in April, but since the implementation of the real estate regulation Act, the demand-supply situation has turned somewhat erratic.

In such a market, prices ought to have corrected themselves, but developers sharply reduced their supply (new launches) to meet the post-RERA commitments, especially on tight deadlines.

“To overcome the impact of reforms, like GST, RERA and demonetisation, the expectations are high from this budget. We are hopeful that they would announce encouraging announcements for strengthening and improving the real estate sector, which in turn would increase gross domestic product (GDP) growth,” said Shantilal Kataria, president of the Maharashtra chapter of Confederation of Real Estate Developers Associations of India (Credai).

Demand in the sector ranges from tax sops for buyers to reduction in corporate taxes for a certain category of housing (affordable housing). It is another matter, though, that the definition of what is “affordable” has undergone changes over successive budgets.

“Many developers have now started calling regular homes as affordable homes, even though these now carry a more-than-Rs50-lakh price tag on them,” said a developer working in the low-cost housing space.

He said the government must clearly delineate what constitutes affordable housing and also tie tax incentives to it, so that developers start building houses where there is the most demand.

“Even in last year’s budget, infrastructure status was declared for affordable housing, but it has yet to be implemented in true sense by the Reserve Bank of India (RBI) or banks. It should be done on a priority basis,” said a Credai note.
Developers also said that the government needs to work out a mechanism for a better pass-through of the Pradhan Mantri Awas Yojana (PMAY) subsidies. Currently, it takes anywhere between six months to more than a year for people to know if their application for subsidy has met with success.

According to Sachin Kulkarni, managing director of affordable housing, Vastushodh, the sector as a whole needs more from the government towards “ease of doing business”.

“Ease of doing business still remains on paper for the real estate sector. The government should change its perception about this sector … the government and urban local bodies are not expected to create 2.2 crore houses under the ‘housing for all’ mission. Only private sector can do this,” he said.