Last year, the central government extended the benefit of interest subsidy on home loans for households. As per the revised norms, the middle income group or MIG-I category home buyers with household income between Rs. 6 lakh and Rs. 12 lakh were made eligible for a subsidy for homes up to carpet area of 160 square metres from the earlier 120 square metres. Similarly, MIG-II category of home buyers with household income between Rs. 12 lakh and Rs. 18 lakh were also eligible for a subsidy for homes with a carpet area of up to 200 square metres as compared to the earlier limit of 150 square metres. This interest subsidy scheme was to close at the end of December 2017 but was extended till March 2019. The housing ministry’s decision to change the eligibility criteria for MIG-I and MIG-II home buyers for houses eligible for interest benefit under PMAY and its extension is a phenomenal move to boost sales of large-sized apartments. The interest subvention under CLSS (MIG) is available up to Rs. 9 lakh or Rs. 12 lakh. This scheme under the Pradhan Mantri Awas Yojana (PMAY) provides housing solutions the economical weaker section (EWS), lower income group (LIG), and MIG. According to market insiders, this subsidy scheme can be a key driving factor behind the projected growth of urbanisation and consequent housing demands of India.
In India, the real estate sector is the second largest employment generating sector after agriculture and is scheduled to grow at 30% over the next decade. Housing, retail, hospitality, and commercial hubs are the prominent segments of this sector. The growth of this sector is well complemented by the growth of the economy in general. It is also positively affected by the growth of corporate environment as it relates to increase in the demand for office space as well as urban and semi-urban accommodations. Under the Union Budget 2018-19, Pradhan Mantri Awas Yojana (PMAY-Gramin) was allocated Rs. 33,000 crore while the urban programme of the scheme was allocated Rs. 31,500 crore.
2018 is expected to be a year of consolidation of products and services in the real estate sector. Private equity investments in Indian retail assets increased by 15% in 2017. India is expected to witness an upward rise in the number of real estate deals in 2018 and that can be attributed to a host of policy changes that have made the market more transparent. A report of CREDAI and JLL titled, ‘Traversing Through The Epic, Predicting The Curve’, released during the CREDAI Conclave 2018 in New Delhi, stated that the contribution of the residential segment to the country’s GDP would almost double to reach 11% in 2020. The report traces seven trends that may change the way real estate business is conducted in India and has also indicated that cities like Nagpur, Kochi, Chandigarh, and Patna could be the new growth centres for the real estate sector in India.
The Indian government along with many of the state governments have taken several initiatives to boost the real estate sector. The ambitious plan to build 100 smart cities is a prime opportunity for the real estate companies. In February 2018, the central government initiated the creation of the National Urban Housing Fund with an outlay of Rs. 60,000 crore. Recently, the Securities and Exchange Board of India (SEBI) has approved the Real Estate Investment Trust (REIT) platform which will help investors to invest in the Indian real estate market. It can create an opportunity worth Rs. 1.25 trillion in the Indian market over the years. During January-March 2018, private equity investments in Indian real estate increased 15% on a year-on-year basis to reach Rs.16,530 crore ($2.6 billion). Between 2015 and March 2018, the retail segment in Indian realty attracted private equity investments of around Rs. 5,500 crore till March 2018.
Jaxay Shah, President, CREDAI, informed, “Having dis-played extreme resilience throughout the course of the past 18 months, the Indian real estate sector is now quite evidently on an upward trajectory backed by the efforts of industry stakeholders and the Government of India.”
The implementation of the Goods and Services Tax (GST) and demonetisation had hit the real estate sector hard. Additionally, the Real Estate (Regulation and Development) Act, 2016 (RERA) had caused some initial hiccups for the sector. Anuj Puri, Chairman, ANAROCK Property Consultants, informed BE, “As per data, 2016 saw new launches of approximately 2,50,000 housing units across the top seven cities while post demonetisation, the new supply went down drastically in 2017 with just 1,26,000 units being launched during the year. The drop in supply was the cumulative effect of demonetisation and the RERA in early 2017, followed by GST in July 2017. As for the housing sales, it saw nearly 18% dip during the same period. Post demoneti-sation and RERA, the realty sector is bracing towards greater transparency and financial discipline. Investors who could earlier easily park their black money into real estate are now fading out as most developers have become extremely cautious and not encouraging any cash transactions. This has impacted the investors who now must pay all money in cheque to the concerned developer / seller. As a result, the input cost (white money) for the investors has increased. The RERA has brought in a paradigm shift in the realty sector and metamorphosed it into a more mature, systematic and regulated one. It has ushered in a new ray of hope and is effectively making the sector more transparent, efficient, financially disciplined and accountable. Numbers clearly indicate that the realty sector has passed the RERA and the GST test and the sector is now gaining momentum.” However, the Indian real estate market is expected to emerge out of the transitory stage to touch $180 billion by 2020.