The past few years have been challenging. The Tsunamis of reforms – economic, taxation and industry related – changed the paradigm for Indian real estate. The impact of these was at two levels: apart from the working pattern of the industry, more important was the effect on buyer sentiment.
The cumulative impact was a double whammy: while sales slowed down; projects underwent the painful situation of funding challenges. While credit options reduced, the situation was made worse by the ILFS and NBFC crisis.
The result of an economic slowdown-induced slow sales, combined with funding challenges, led to some projects being delayed or stalled. The credit squeeze, in some instances, saw developers also face the challenge of last mile funding just not being resolved.
Negotiating these troubled scenarios, the real estate industry has worked its way through the challenged times. Representations were made to authorities for measures that would support a revival. 2019 was a tad better than the previous two years, it raised expectations that 2020 would be the year of growth, of recovering from the Tsunamis – then, COVID-19 struck. The lockdowns it resulted in were as the Hon’ble Prime Minister put it, “first about saving lives; then saving livelihood”.
The fight against COVID-19 induced economic crisis is on-going. On the aspect of saving livelihood, the expectation was that there would be major stimulus moves on part of the Government. For real estate, this has not entirely come true. Post the lockdowns, there has been a slow restart across construction sites; labour shortages as also disruption in supply chains making their presence all too painfully felt.
Regulatory authorities have extended deadlines and given moratoriums. In absence of ‘normal’ business, these moves at best push the timelines ahead by a few months. The danger of turning NPA is a worry across the economy; real estate included. The authorities have come up with some positive moves, but a lot more needs to be done.
Measures by the Central Government and regulatory authorities have largely focused on the ‘supply’ side, the need is for moves that will also enhance buyer sentiment. The state government has also undertaken good steps, but needs to do more. It reduced stamp duty, revised the ready reckoner rates almost unchanged; where the market reality has been one of transactions happening if the ready reckoner rate gets reduced by 20 to 30 per cent.
Industry bodies have represented this and similar aspects to the authorities, hopefully, the powers-that-be will understand the exact issues where problems need to be resolved. Not reducing premium payments for FSI, to cite an example, instead allowing staggered or delayed payments is not a solution that will work; it will at most delay the project’s pain-point to a date in the future. Last mile funding is a challenge where some initiatives like the SWAMIH fund have happened, but the requirement is far, far huge in quantum.
From an industry perspective, the K V Kamath Committee’s recommendations will hopefully result in positive steps. Reduction in stamp duty and other levies as also a one-time roll-over of debt, implemented in tandem with last mile funding for stalled and delayed projects are among measures which have the potential to create positive sentiment in real estate.
Revival in real estate is linked to improved buyer sentiment, resulting in sales. For this, the focus of stimulus/ policy steps by the Government of India need to shift from ‘supporting supply’ to ‘enhancing demand’. The need is to first focus on the buyer and second, ensure positive sentiment which will encourage buying.
India can ensure higher disposable surplus in the hands of the consumer, to give an example, by reducing GST rates by 50 per cent for a six month period. Home loans at even better than present rates with in-built protection in case of EMI payment defaults over the next year or so will enhance buyer confidence. Such moves, taken well in time for the upcoming festive season, should create a positive scenario, and result in recovery.
Dr. Niranjan Hiranandani - National President - NAREDCO
