Revival of real estate in 2021: What needs to be done

The real estate market in India is the second-highest employment generator in the country after agriculture. The sector which accounts for 6-7 per cent of the economy is interlinked to as many as 250 allied sectors. By 2025, the sector is expected to account for 13 per cent of the nation’s economy. With timely execution of all the needed reforms, it could become a major wealth creator in the forthcoming decades, as housing requirement booms.

The government’s structural reforms such as GST and RERA and added liquidity in the banking system restored buyer confidence in the real estate sector. While the market made rapid strides in the past few years with these reforms, mid-2020 posed a tough challenge for the industry with the imposition of the national lockdown. However, with support from the government and RBI, the industry and developers crawled back to recovery by the end of year 2020. Positive sentiment visible across the economy, and GDP showed visible signs of growth through a V-shaped recovery. Over the last few months, the government has been rolling out a number of measures to revive the sector and economy at large. The industry is now bullish for growth ahead and optimistic of an unprecedented recovery.

With the onset of 2021, the momentum of historic home sales due to low interest rates, reduced stamp duty clubbed with the festive quarter, and developer offers witnessed at the closure of 2020, will further gather steam. The vaccination immunisation having started to push India to normalcy, the real estate market will certainly bounce back.

Year 2020 has seen continued support from the government to push the sector on a growth trajectory, and we expect the same stance in 2021 as well. The slew of measures announced by both central and state governments and developer offers created the much-needed urgency to own a home that will ensure the continuation of sales momentum for the upcoming two-three quarters.

The reduced stamp duty, ready reckoner rates along with decade-low home loan rates of 6.9 per cent, and reduction in premiums by 50 per cent in Mumbai, set the ball rolling for the property market, which saw good traction build up for 2021. We are all aware that the lowering of stamp duty offered by some states for the purchase of houses will cease to exist after the set deadline. In Maharashtra, the deadline is March 31 to avail a reduction of 2 per cent on stamp duty payment, post which home buyers will have to pay 5 per cent stamp duty. Now, it is the role of the developer to drive sales, with the government having given the much-needed push.

The time is now ideal for developers to take advantage of the pent-up demand that would help clear most of the unsold inventory. Developers have been sensible about pricing. And with buyers venturing out to invest in homes, developers should continue giving their best to ensure stability of prices.

To attract buyers at large, the developer community should look at creating projects with basic amenities. The lockdown has taught everyone the importance of maintaining a healthy lifestyle, and that is something the developers should take notice of. Providing basic amenities focused on health and lifestyle would not only ensure the safety of the consumers, but would also enable faster decision-making in terms of buying a property.

Realtors eyeing for an uptick in sales will have to support the buyers with a host of offers. These could be zero stamp duty and registration charges at the time of home booking (these would be recovered on possession), buy now and pay stamp duty later, attractive subvention schemes, EMI holiday scheme, which assures no payment or EMI hassles until possession of the project, and attractive home loan schemes from the developer. Further, developers’ offers and discounts by way of consumer durables, home furnishings, modular kitchen, furniture, and gold coins on purchase of the unit will result in higher sales.

Year 2021 should see increased sales with further interest from buyers to own a home, understanding that the Indian real estate industry has now become a buyers’ market. The vaccination immunisation program having started will further boost the confidence of homebuyers, bringing in further cheer to the market, leading to a turnaround in the realty market.

The government should continue with its supportive stance in 2021, through policy, taxation, and stamp duty cuts. On the industry front, further rationalisation of GST for under-construction projects and benefits in taxation in the forthcoming Budget will be welcome moves. We expect the extension of the lowest interest rate and easy liquidity regime to continue to lead to a positive push to the vision of ‘Housing-For-All’ in the year ahead. A systematic reduction in circle rates could also lead to a rise in demand which would augur well for the industry. If circle rates are relaxed, even for a limited period of time, it would help bring down property rates which are still on the higher side. With demand for housing increasing due to the ongoing government support, the government should also ensure to bring down the number of permissions and introduce single-window clearance for timely completion of projects.

State governments across India should closely look at the model prepared by the Government of Maharashtra and mull cutting down stamp duty and circle rates. This move has not only proved beneficial for the buyer but has also helped the developers record good sales, eventually helping the exchequer with supporting revenues.

Understanding that we have entered the vaccination immunisation phase and with all the other moves set in motion for a faster recovery of the economy, one can surely be optimistic about the sector’s growth prospects in 2021.

(The author is  Vice Chairperson of Nahar Group and Sr. VP NAREDCO (Maharashtra))

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