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REAL VIEW

Positive notes in first quarter

The market sentiment that had slumped during 2017 due to disruptive structural changes in the real estate sector, has bounced back in the first three months of 201918 May 2019 | 10:13 AM

Optimism has remained the operative word in the realty circles for the past three to four quarters.

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Geetu Vaid

Optimism has remained the operative word in the realty circles for the past three to four quarters. But the first quarter of 2019 seems to have added positive sentiment to the slowdown-plagued sector, giving a fertile ground to optimism. Though on ground the sales have not gained the expected momentum and the primary as well as the secondary markets in the residential segment are still struggling to find buyers, yet market watchers see a build up that will soon augur better days. 

According to the recent Knight Frank Sentiment Index Survey Q1 2019, the current sentiment score has inched 5 points upwards from the preceding quarter.   

Data gathered by PropEquity reveals that new launches and absorption of the existing inventory are also slowly gaining momentum. Gurugram has seen 1,724 new units launched in the affordable segment and 200 in the luxury segment till March end, while MMR and Pune had 1005 and 1061 units in the affordable category respectively in the same period. 

According to Anarock Property Consultants there has been a 12 per cent hike in purchases across seven key cities even as the prices stagnated and just 1 per cent of the unsold inventory was offloaded. 

Lok Sabha elections,  usually considered a dampener, have not had much negative impact this time around. Though one can’t deny the fact that the market had already bottomed out after a prolonged slowdown to see a further fall due to elections, these seem to have given developers, buyers and investors some more time to be in the wait-and-watch mode.

Three factors, including favourable provisions in the Union Budget, lowering of the repo rate in the last two monetary policy reviews and GST rationalisation — are the key positive aspects in the first quarter of the year. According to Ashish Bhutani, CEO, Bhutani Infra, “Government sops have helped the real estate sector begin the year with a bang. All over the country the real estate sector is on a high, in fact, top cities saw an increase of around 27 per cent over previous year in new launches”. Pradeep Aggarwal, Chairman of ASSOCHAM National Council on Real Estate, Housing and Urban Development adds,“Housing sales have increased between 10-15 per cent in the first quarter thanks to the effects of GST rate cuts, interim budget  and lowering of home loan rates. As many as 80,000 units had been sold in Q1 2019 with NCR, MMR, Bengaluru and Pune accounting for more than 80 per cent of the sales. Sales in the NCR have increased by 8 per cent over the previous quarter”. 

Budget thrust

The interim budget this year can easily be termed as the first major step forward for real estate in Q1 2019. Higher saving rates, incentive for investing in second homes without being penalised by way of additional taxation, were welcome steps for prospective buyers. The developers, were also given some respite with removal of tax on unsold units. “The overall packaging creates a good reason for the end-user to reach out for the cheque-book and negotiate a deal”, says Arvind Nandan, Executive Director, Research, Knight Frank India.

Going soft on GST 

Over the past 12 months GST has been seen as a major disruptor in the realty sector. Developers as well as buyers have virtually been wading through fog on this issue. How much tax the buyer has to pay and how the developer will pass on the input tax credit (ITC) actually made buyers stay away from under-construction properties. With the GST Council bringing the rates down to 1 per cent for affordable houses, and 5 per cent for others, GST has become more realistic. Rattan Hawelia, Founder & Chairman, Hawelia Group, terms this as a positive move. “Initially due to high GST rates particularly in affordable category the developers were not able to pass on more than 4-5 per cent rebate. After slashing of GST rates, the homebuyers’ now can buy affordable category houses at a good price and overall they can save Rs 2-3 lakh”, he adds.  

Easing interest rates

Two successive cuts in repo rate is also being seen as a positive measure by stakeholders. The current rate is at 6 per cent, and even though banks are yet to  reduce effective home loan interest rates, it is just a matter of time before these are eased. Low home loan rates are always seen as a good sign for increased sales. “It does not harm the buyer to start discussions and zero-in on a likely deal”, says Arvind Nandan.

Price consolidation

Riding on the positive sentiment, the future sentiments regarding the price appreciation have also showed some positivity in Q1 2019. “Improving from the preceding quarter, majority of the stakeholders have opined that the residential prices will either remain in the current range or may even inch upwards in the coming six months”, says Shishir Baijal, Chairman and MD, Knight Frank India.

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