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After demonetisation, the quick developments in price corrections, increasing transparency and the possibility of REITs is likely to see Indian residential property move back into the preferred investment category in five years.
“While the real estate business has currently taken a step back because of the demonetisation, it now stands on a very strong foundation for long-term growth as more reforms are in the pipeline,” said Anuj Puri, Chairman & Country Head, JLL India.
‘Welcome reforms’The reform developments like demonetisation and also the effort to bring in the Real Estate Regulatory Act (RERA), the government has made rapid forward strides in removing major inconsistencies in the system.
The riskiness previously associated with Indian realty is rapidly reducing as the government is also bringing in the Benami Transactions Bill and the Goods and Services Tax (GST) is set to be implemented.
“Equity investments at such times (reforms) can work extremely well for long-term investors. In the midst of this changing composition of debt and equity for developer books, there will also be a shift in the deployment trends,” he added.
With demonetisation, it is widely anticipated that land prices will come down. M Murali, Managing Director of Shriram Properties, said, “Approximate estimations say southern states may witness 20 per cent fall in land prices while Mumbai and NCR may witness a fall of 30 per cent and 50 per cent respectively corroborated with the cash components involved in the transactions hitherto.”
Plus pointThe plus of demonetisation is that it is expected to bring substantial amount of funds to the troubled real estate sector. “Developers will be able to have a handle on costs through the life of the projects,” said Surendra Hiranandani, Chairman & Managing Director, House of Hiranandani.
“Since 2010 there has been a lot of pain in the market where developers sold properties at low prices and then were hit by severe inflation, resulting in a large number of projects remaining uncompleted,” he added.
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