Real Estate

Consolidation imminent in real estate sector, says Sobha MD

Anil Urs Bengaluru | Updated on December 26, 2019 Published on December 26, 2019

JC Sharma, Vice-Chairman and MD of Sobha Ltd   -  STRINGER/INDIA

With the Union Budget weeks away and the benefits of all the initiatives flowing into the economy, consolidation of the real estate sector is imminent and “we believe that 2020 should be a year of turnaround”, said JC Sharma, Vice-Chairman and Managing Director, Sobha Ltd.

“With the real estate sector playing a critical role in driving the economy, it is only a matter of time before housing demand improves,” he added.

In spite of these difficult times, India’s ability to attract capital is visible in the services sector, especially IT, ITeS and start-ups. “This is due to the growth of office space absorption and clearly demonstrates gradual revival of demand in the economy,” he said.

Referring to the RBI’s decisions, Sharma said: “Despite five consecutive rate-cuts by the RBI, banks have not passed on the benefits to borrowers due to large non-performing assets.”

Considering the situation, the government has become proactive and introduced further measures to revive demand. These comprise corporate tax reduction and last-mile funding of ₹25,000 crore as Alternative Investment Fund (AIF) for unfinished projects, including projects declared as bad loans or facing insolvency proceedings.

According to Sharma, during the year, the number of insolvencies increased significantly, highlighting the severe cash crunch faced by several developers. These developers were unable to complete projects and meet their debt obligations in the face of the funding crisis.

Other significant reforms that have been introduced in the last few years include demonetisation, RERA, GST, bankruptcy code and tightening of liquidity. “While the measures were much needed for the economy and for the real estate sector, they also created a challenging environment.”

Tough year

On the year gone by, Sharma said, “2019 has been a tough year for the Indian economy, with the GDP slipping to reach 4.5 per cent by September-end. This has prompted the government to take growth-centric initiatives to revive the economy.”

He added that the year started with the Union Budget FY20, continuing to support to the affordable housing segment. An additional deduction of up to ₹1.5 lakh for interest paid on loans borrowed up to March 31, 2020 for purchase of a home valued at ₹45 lakh has given an added fillip to the affordable housing segment. Further, the GST rate cut was announced under the new scheme of 1 per cent for affordable houses and 5 per cent for other categories. These measure have worked to some extent.”

Published on December 26, 2019
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