MAKAAN DEMAND

While Har Ghar Mein Kamal Khile (Let the Lotus bloom in every house) turned out to be a popular slogan for the Bharatiya Janata Party (BJP) and its epic victory run in the recent Lok Sabha polls, the dream of many a common man of owning one’s own home is just a fantasy for many. With a new government in place, will the common man get to live in a place he can call his own? Will the realty sector bloom like the Lotus in the coming years? Will developers live up to their promises? These are questions that the new., government will seek to answer in the days to come . . .

The new government with a clear majority has come at the right time. Even as the Sensex and other  parameters of the economy have zoomed, the electoral verdict, among other things, and growth of the construction sector in the country.

“There is hope that the government will create new structural reforms, including strict governance for infrastructure bottlenecks and reduction of red tape,” says Thomas Rookmaaker, director, Sovereign Ratings Group, Fitch Ratings.

” We hope that with such a resounding mandate,the NDA government will be well disposed to take firm and decisive policy decisions for removing various bottlenecks dragging the economy in general and real estate sector in particular to propel the growth. As BJP’s  manifesto has promised housing for all, we look forward to work with the government in achieving that goal,” says Rohit Raj Modi,  officiating president, Credai-NCR.

Despite the realty sector being in the rough for quite some time, developers have charted and explored newer corridors to invest their capital in. To name a few, such corridors, Sohna and NH-24 in Delhi-NCR, Ulwe and Karanjade in Mumbai, Hennar Road in Bangalore, etc. have shown remarkable resilience and have developed many a lower-priced project for buyers.

At the same time, the country’s residential sector is still passing through an interesting phase. According to a recent report by international property advisor, JLL, while supply is showing variable signs of cyclical ups and downs depending on launches, the demand is showing a slowing curve in NCR -Delhi, but stable in all other cities, primarily on the back of new launches in emerging residential corridors which have been successful in attracting buyers.

“On the supply side, affordable and lower-priced residential corridors such as Greater Naida and NH- 8 (NCR-Delhi), western suburbs and T hane (Mumbai), Whitefield and Hosur Road (Bangalore) and southern suburbs (Chennai) were the prime drivers of the new launches. On the demand side, while NCR-Delhi contributed over one-third of the total new launches, its share of net absorption dropped from above 40 per cent to just over 36 percent by the first quarter of 2014,” says the JLL report.

There is sense that the Land Acquisition Act, which came into force from January 1 this year, will make it even more difficult to bring about the much required  investments, as land prices are expected to triple in the coming days, and approvals to become more complex for the industry

Despite the realty sector braving tough times, developers have explored newer corridors to grow their capital in the recent past. To name a few, Sohna and NH-24 in Delhi-NCR, ULwe and Karanjade in Mumbai and Hennar Road in Bangalore have shown a remarkable  developments to offer lower priced projects to buyers.

The country currently requires 18.78 million additional houses, of houses, of which 95.62% are in the economically weaker section (EWS)/lower income group (LIG)/middle income group (MIG): ASSOCHAM

The new government may look at helping on quicker land acquisition, faster approvals, easy and low-cost funding availability and better infrastructure to make it a more interesting proposition for developers and investors. In Gujarat, the government has been extending a helping hand to developers who construct low-cost homes, although availability of cheap capital, lengthy approval process and affordable land availability continue to remain challenges.
ANUJ PURl, Chairman & Country Head, JLL India

Investors have become cautious and are investing in select projects, and by staying away, they have affected investor driven, speculative residential markets. Buyers have become fence sitters, waiting for economic headwinds to improve and better credit conditions
ROHAN SHARMA, Senior Manager (Research & REIS), JLL India

What the new Govt needs to do
• The new government should ease the conditions for FDI in real estate and reduce minimum capital requirement from $10mn to $5 and minimum tenure before repartition from 3 years to 1 year
• It should give an infrastructure status for the affordable housing sector to attract more capital and investment formation
• The much sought after housing regulator should be in place to monitor all dos and don’ts in the sector
• For transparency in all aspects,there must be digitization of land records in all states
• Insurance/pension funds need to be allowed to invest in the affordable housing sector
• Tax exemption on income derived by an undertaking, engaged in development and construction of smaller dwelling units
• Review/repeal Sec 43C in the Income Tax Act on taxation at circle rate and restore 80 IB (10)
• Impetus to the essential infrastructure at the outskirts of tier/tier II cities to ensure affordable housing clusters are well connected and cities are congested.

As India’s housing shortage is legendary, and the government has always kept low-cost housing in focus, most developers have shied away from focusing on this space because affordable housing is a relatively low-margin business and in high inflationary scenario, profitability remains a key concern. Equity participation by private equity (PE) funds has also been limited in the budget housing space. Therefore, a strong initiative is required of the new government to heal the sector.

According to a survey by one of the leading industry chambers, ASSOCHAM, the country currently requires 18.78 million additional houses, of which 95.62 per cent are in the economically weaker section (EWS)/ Iower income group (LIG)/middle income group (MIG).

What buyers want from the new government?
• The government should review housing loan schemes and provide low interest rates to the buyers/investors.
• There Should be a mandate for the developers across country to construct EWS/LIG units and authority to create enabling environment with increased floor area ratio(FAR)
• Need to develop a full proff mechanism for rental housing and ensuring implementation of REITs & REIMs under the same
• There should be availability of higher FSI with relaxed density norms for affordable housing projects

“The new government may look at helping on quicker land acquisition, faster approvals, easy and low-cost funding availability and better infrastructure to make it a more interesting proposition for developers and investors / buyers. In Gujarat (the home state of Narendra Modi), the government has been extending a helping hand to developers who construct low-cost homes, although availability of cheap capital, lengthy approval process and affordable land availability continue to remain challenges,” says Anuj Puri, chairman and country head, JLL India .

As foreign money has been waiting in the wings and awaiting political stability before entering India. Experts and developers are hopeful that now foreign fund will keep flowing into the domestic real estate sector

However, Rana Kapoor, president, ASSOCHAM, believes that India is at the crossroads of experiencing rapid urbanisation in the current decade. Addressing the concerns of affordable housing is the need of the hour, he says. “Given the slowdown in the real estate sector, additional HNI investments in the sector at high interest costs and the increase in ready reckoner rates by some state governments, will only push up property prices further. Taking adequate and appropriate measures to increase affordable housing alternatives will not only create a GDP multiplier, but also improve the living standards of Indian citizens.”

As the infrastructure and real estate sector occupy a big pie in the country’s growth, an improvement can definitely be expected in the near-term investment sentiment. This will have an impact on the investment growth within the GOP.

Any stable market that promises more transparency in processes, transactions and healthy returns has the potential to attract funding. India too has the potential to deliver quality investment grade real estate that not only promises growth but also promises healthy returns to its investors. With some of the proposed reforms such as the introduction of real estate investment trusts (REITs), the market will then provide an investment avenue in quality real estate within the country
Sachin Sandhir, MD, RICS South Asia

We hope that with such a resounding mandate the NDA government will be well disposed to take firm and decisive policy decisions for removing various bottlenecks dragging the economy in general and real estate sector in particular to propel the growth. As BJP•s manifesto has promised housing for all, we look forward to work with the government in achieving that goal
ROHIT RAJ MODI, Officiating President, Credai-NCR

Given the slowdown in the real estate sector, additional HNI investments in the sector at high interest costs and the increase in ready reckoner rates by some state governments, will only push up property prices further. Taking adequate and appropriate measures to increase affordable housing alternatives will not only create a GOP multiplier, but also improve the living standards of Indian citizens
RANA KAPOOR, President, ASSOCHAM

The JLL report says: “As a testimony to that, industrial GD P (comprising of investment-heavy sectors such as mining, manufacturing etc.) is forecast to grow at 3.5 per cent year-on-year (consensus of professional forecasters empanelled by the RBI) during the current fiscal year 2014-15 as opposed to an abysmal 0.6 percent year-on-year in the previous fiscal year.

As for the investment in the sector is concerned, investors clearly suggest that domestic money is in the search for good investment options; investors are eager to strike a deal at attractive valuations. However, foreign money has been waiting in the wings and awaiting political stability before entering India. In that respect, a clear majority is the best possible scenario.

Earlier experts were thinking that most investors were comfortable with a government with minor alliances as long as there was a clear agendas and strong voice dictating those agendas. But things have changed now. “What investors are looking for in a ruling government is clear goals and the will and strength to achieve them,” adds Puri

What developers want from the new Government?
• The government should review RBI norms for project finance; uniformity in the end user income ceiling norms for affordable housing units for EWS and LIG.
• There should be rationalization of direct and indirect taxes in the real estate industry to enable competitive pricing for the end user.
• There should be single window clearance mechanism for housing sector in the country.
• Need to incentive low cost and innovative technologies such as prefab for producing large volumes of affordable housing units.

In the recent past, infrastructure projects planned and underway were positioned as pull factors for residential projects launched in the vicinity of such infrastructure developments. New highways and the Metro connectivity also raised the attraction quotient for upcoming locations. But unfortunately, the buyer/investor’s sentiment remains weak given the high interest rates and rising residential prices.

“Investors have become cautious and are investing in select projects, and by staying away, they have affected investor-driven, speculative residential markets. Buyers have become fence sitters, waiting for economic headwinds to improve and better credit conditions,” says Rohan Sharma, senior manager (Research & REIS), JLL India.

On the other hand, developers have been taking a wait-and-watch stance, holding the prices. They have shown more flexibility in offering discounts and are looking towards proactive policy changes. They are also targeting emerging corridors for low-ticket project launches. Keeping their sentiments in mind, will the government be able to drive their thought into reality?

FDI IN REALITY

With a view to protect the interest of small and medium retailers and SMEs, the new government’s manifesto has more or less conveyed its resistance to opening up foreign direct investment (FDI) in certain sectors.

Setting up a real estate regulator without removing the difficulties and delays in obtaining multiple statutory clearances and without removing the provisions for harsh punishments, would be detrimental to the industry since with the present set up, no real estate project can be completed in time obtaining all the statutory clearances
RK ARORA, CMD, Supertech

Under Modi rule in India, the real estate market is going to respond much better. Stability of the government has always remained a matter of concern for the real estate sector as it does matter in decision making sentiments of the buyers. We also see 2014 as the year of real estate maturity is the fact, that REIT, FDI in retail and a number of other funding options for the sector will actually be put in place
DHIRENDRA GABA, CMD, Fair wealth Housing

Expectations are high from the new government as there are indications that new government will push its growth agenda. The second half of 2014 is definitely going to bring about fresh energy into the real estate sector. There is an urgent need to reform the approval process as state and central agencies act individually without any correspondence leading to delay in getting a project off the ground
ANIL MITHAS, CMD, Unnati Fortune Group

The real estate regulation bill which was been kept waiting for almost three years now might be looked into more seriously. The highlighting feature would be the flow of income from foreign nations. Most of the nations wait during the polling season in a country in order to see how the new political and economic environment shapes up and hence it becomes very essential that the newly formed government must act in favour of this sector so that the future economic stability is controlled
SHIVAKSHI GOGIA, CFO, Ascent Group

A stable government at the Centre has potential to boost the sentiments and in return, attract foreign money. We expect the new government would roll out sound policy which would be investor friendly and help inclearing the backlogs
DAVID WALKER, ED, SARE Homes

The new end should look towards quicker land acquisition, faster approvals, easy and low-cost funding etc., as it will increase the confidence of both builder as well as buyer to boost the realty market
AKTULSIANI, CMD, Tulsiani Constructions & Developers

Banks have to play a very bigger role to make available home loans in India and abroad at an affordable interest rate. Modi-led government should accept this challenge and come out with a solution immediately
KAMAL DUTTA, MD, DPL Group

This will revive consumers’ trust i n thesector, however, as real estate is a state subject, the central government can at best create a model of best practices for offering quicker clearances and persuade state governments to adopt it
NEERAJ GULATI, MD, Assotech Realty

Recently, ASSOCHAM had also urged the new  government to ease the conditions for FDI in real estate and reduce minimum capital requirement from $10 mn to $5 mn and  minimum tenure before repatriation from 3 years to 1 year. But as per JLL study, retail is in the negative list as per the manifesto;  however, if the country has to welcome FDI and international investors, it might need to consider the number of international retailers waiting on the side-lines in wait-and-watchmode.

“A few retailers have already announced their plans to go ahead with the cash and carry model of operation  in India, therefore kick-starting a new cycle of investment in retail. The overall FDI policy will be conducive, as the new government is committed to promote FDI in other sectors and also to reforming the Foreign Investment Promotion Board (FIPB) functioning to make it investor friendly,”says Puri.

As foreign money is the most sought-after wealth for future India, experts and developers are hopeful that now foreign fund will keep flowing into the domestic real estate sector.

“Any stable market that promises more transparency in processes, transactions and healthy returns has the potential to attract funding. India too has the potential to deliver quality investment grade real estate that not only promises growth but also promises  healthy returns to its investors. With some of the proposed reforms such as the introduction of real estate investment trusts (REITs), the market will then provide an investment avenue in quality real estate within the country,” says Sachin Sandhir, managing director,  RICS South Asia.

Regulatory Bottleneck

In a bid to end red-tapism and bring out transparency in the realty sector, the draft Real Estate (Regulation and Development) Bill-2011 has proposed to set up a real estate regulator. With a buzz in the air that transparency and good governance will bring the sector to a trust level for one and all, industry insiders are hopeful that setting up a real estate regulator may be the new government’s priority.

However experts believe that the new government will definitely boost employment and growth in the next 12 months period if it works towards the betterment of the sector by removing the regulatory bottlenecks in the way of project approvals and bring pending reforms such as real estate regulation.

“The Real Estate (Regulation and Development) Bill 2011 has been pending before Parliament from a long time. I do believe that the government should bring such reforms at a priority. Disclosure norms envisaged under the regulation will improve investments into the sector and help consumers in a big way. While consumers will then have all information on a particular project, the Appellate resolution,” says Sandhir.

It is likely that the new government will take up the legislation afresh wherein the developers are much hopeful with their concerns and expect it can be addressed favourably.

Land Acquisition Woes

There is sense that the Land Acquisition Act. which came into force from January 1 this year, will make it even more difficult to bring about the much required investments, as land prices are expected to triple in the coming days, and approvals to become more complex for the industry. Considering that the land bill was passed with majority support, including by the BJP. the industry may find it increasingly difficult to acquire land, which will cause inordinate delays for the projects that can cause massive cost overruns

Real estate companies have been suffering for a long time due to high interest rates, tight liquidity, enormous debts and lending curbs. A slowdown in demand means there has been a piercing barb in inventory of late. For investors, it is not all dead and buried, as most real estate stocks are open for as low as a fraction of their book values, making them eye-catching from a long-term perspective. But for a government, key element is providing homes to the majority and at affordable prices
ANIL KUMAR, JMD & CEO, Ansal API

The last year we witnessed a major setback in the sector as the demand for property had gone far below the expectations. The investors had been in and out of the market most of the times. As far as the market condition is concerned, it will definitely recover now as a new government has stepped in. It is Modi’s agenda to work for the cause of the common public and one of the most prominent issues addressed by all the parties this season was the Right to Homes
NEERAJ MISHRA, Director, Praxis Group

BJP has already promised to build 100 new modern cities across the country. As Modi is a ground-level leader, a common man has been repeatedly assured of having food, shelter and employment if his government comes to power. So, I think the housing sector is likely to grow up in the coming years in his governance
VIKAS GUPTA, JMD, Earth Infrastructures

For starters, an area where this sector would like the new government to work upon would be the faster clearances of projects and bringing up of the regulation bill. This will boost the moral and confidence of the future buyers and will build their faith as well, as a regulator will be available to monitor the transactions and happenings. Moreover, the government must renew its attempts on attracting FDI into the country so as to improve the overall business environment
ARVIND SINGH, MD, KRasa Group

The new government must focus on redressing disputes between buyers and developers by improving transparency in the real estate sector and forming an authority which can take up this responsibility. As an immediate goal, the new government must set up the real estate regulator which ensures fair practices in the Industry.
GAURAV GUPTA, General Secretary, Raj Nagar Extension, Association & Director, SG Estates

Thundering win by BJP will be a big boost for the economy. Real estate is also part of it. The key change will be single-window clearance, which will ease of the hurdles for real estate sector
AJAY SINGAL, Director, Avalon Group