Real Estate

‘RERA and GST will be determining factors for realty’

Abhishek Law Kolkata | Updated on January 11, 2018

Dr Samantak Das, MRICS, Chief Economist and National Director

Knight Frank 2

Residential real estate market in the country is expected to see some uptrend with improved buyer sentiment towards the second half of 2017. The Real Estate Regulation Act (RERA) and GST will improve the sentiments, says Samantak Das, Chief Economist & National Director (Research), at real estate consultancy major Knight Frank.

In an interview to BusinessLine, Das talks about the property market outlook for the year.

Please tell us the performance of the residential property market so far this year.

The January-June period was quite eventful with the focus being on affordable housing. Interest subvention was announced, RERA was rolled out and the GST regime kicked in. But, in this period, there has been a drastic fall in new launches. New launches came down by 41 per cent (year-on-year) in the top eight cities that include Kolkata, NCR, Pune, Mumbai (including Thane and Navi Mumbai), Ahmedabad, Chennai, Bengaluru and Hyderabad.

What we saw in the first two months (January and February) was demonetisation hangover. Nothing really moved then.

March and April were better. And in May and June, developers focussed on RERA compliance and on pacing up construction of unfinished projects. So new launches took a hit. In terms of sales, it fell by 11 per cent year-on-year.

How is the second half of this year expected to play out?

Launches may still not revive during this period. Developers will take time to adjust to RERA and GST. We believe that if RERA is implemented in letter and spirit across the States within a couple of months, then buyers’ confidence will be revived and we’ll see better traction than the first six months.

Will GST cause any price escalation or tax burden?

I do not think so. RERA and GST will be determining factors and developers will try not to pass on any extra cost burden to the end-user. Developers have responded well to GST and also taken cognisance of the fact that the market is at an abysmally low level. There can be a maximum of 1 or 2 per cent change in calculations for buyers, but developers will take care of that increase.

You are pinning a lot of hopes on RERA. Do you see States marketing it properly to boost buyer confidence?

Maharashtra has done it. Gujarat has recently put in place the regulator. Uttar Pradesh is still in the draft notification stage and Haryana is yet to implement it. West Bengal has not done it either. I believe States will have to speed up the pace of implementation of RERA.

But there are allegations of States diluting RERA ...

I do not think so. Some States have modified RERA according to their market dynamics. But the major provisions have not been diluted.

Is a price decline expected now, so that sales pick up?

CPI is more than the city price index of residential real estate. That means corrections have happened. In parts of NCR, developers have brought down prices by approximately 4 per cent. So, going forward, the price rise we saw 4-5 years back will never happen.

Once again, buyers will benefit from RERA implementation. Buyers and sellers will have the same type of information about projects in an area. In such a scenario, a developer cannot profit through sudden surge in price or delay in construction. Speculative investments in real estate will come down.

So when do you foresee an upswing for the sector?

Not before 2018.We expect new launches, stable prices and a stable market. When in 2018, it is difficult to say. To be fair, recovery in the sector can take longer.

Published on July 07, 2017

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