The Indian real estate sector has experienced a slowdown in the last two years, says Nitin Agrawal, MD of Bhopal realty juggernauts — Swadesh Builders. It’s due to numerous reasons. It started with the Real Estate Regulation and Development Act (RERA), and supposedly ceased with Goods & Services Tax (GST).
As the impact of Real Estate (Regulation and Development) Act, 2016, (RERA Act) and Goods and Services Tax (GST) tapered down, along with increasing home sales and new launches picking up, the country’s real estate market embarked upon the path to recovery in 2018. This year, too, began on a good note for the residential market, both on the demand and supply sides.
RERA drastically changed the Indian real estate landscape. The act made it necessary for real estate developers to register their projects with Real Estate Regulation Authority. It laid down some consumer-centric rules that included a law that will make developers pay interest to customers if they delay the project.
RERA act also brandishes a law where developers can’t make changes to the project plan without a written consent from the buyers. Hence, it will remove the unrequited cost increases that often come out as an obnoxious surprise for the customers. Demonetization curbed the black money and benami property act reformed the sector to fight tax theft. GST was one of the biggest game changer after RERA.
The system has become more transparent and reliable. The reliability has attracted foreign investors who are now partnering with domestic companies more than ever. According to Nitin Agrawal, it is promoting the inflow of Foreign Direct Investment in the sector. Shobhit Agarwal from Anarock Capital explains, “Foreign funding always reacts favorably to signs of increasing transparency, accountability and financial discipline.”
These events have changed how the real estate sector thinks. were focusing more on luxury projects that were not very affordable to the mid-section society. Hence, they reconsidered their strategy and started making affordable and practical units for the average Indian buyer.
The developers are streamlining the prices as well. Fresh projects are being priced lower so they sell quicker. A high-priced flat in a bulk will take more time to be sold and would yield less internal rate of return.
Anuj Puri, Chairman of Anarock Consultants points out that builders are prioritizing their projects. They are focusing on one project at a time as big brother RERA and other real estate watchdogs are keeping an eye on the performance of real estate developers. An unsuccessful project may hinder the launch of the next project. The trust of people in their brand will wane, resulting in low sales and high losses.
The government can further aid the real estate sector by simplifying some of the laws. Apart from providing affordable housing, the government should help developers build small and affordable units that complements the Pradhan Mantri Awas Yojana.
Real estate is a big sector that contributes heavily to the Indian economy and GDP. It also creates massive job opportunities. If the upcoming boost in real estate is successful, it could potentially solve the crisis of homelessness in India.