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Ambiguity over RERA & GST forcing builders and financial institutions to ‘wait and watch’

Developers today are unclear on the processes and systems of the RERA guidelines and will take time to accordingly recalibrate their businesses


While the impact of demonetisation on the property market has been “transient,’ ambiguity over the impact of various policy interventions like Real Estate (Regulation & Development) Act, 2016 (RERA), Benami Transactions (Prohibition) Amendment Act, 2016 and Goods and Services Tax (GST) is weighing high on builders who continue to be in a ‘wait and watch mode,’ says a new real estate sentiment index.

On the other hand, these policy measures have infused life among institutional funds, including banks. Stakeholders feel that these initiatives by the government will play a major role in attracting institutional funds, whose participation in the sector was at a modest level, according to the latest findings of the Real Estate Sentiment Index for the first quarter of 2017 by FICCI-NAREDCO-Knight Frank India.

Impact of policy measures on the residential sector

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The residential sector is going through a difficult phase, and sentiments of developers reflect the same. Developers today are unclear on the processes and systems of the RERA guidelines and will take time to accordingly recalibrate their businesses, says the Real Estate Sentiment Index.

Watch: How RERA is going to change your homebuying experience 

There is a striking recovery in the sentiments of residential sales in the first quarter of 2017 with nearly 64 percent of the stakeholders are of the view that residential sales are going to improve in the coming six months. Reasons such as increasing transparency in the sector, lower interest rates by banks, attractive prices and a robust economic outlook have uplifted the sentiments of the market

In contrast, the first quarter of 2017 survey reveals that 60 percent of the stakeholders are not too optimistic on the residential price appreciation in the real estate sector in the coming six months. Huge inventory along with slow sales velocity are some of the major reasons for this stagnation in prices.

All the zones, barring West, show a de-growth in sentiments in the first quarter of 2017. This optimism comes from the fact that Maharashtra, being one of the largest states in the west, is the front-runner in putting systems and processes in place for RERA, which in turn has uplifted zonal sentiments towards the future, says the index.

Growth in office space transactions to be plateaued

With regards to the office market, investors believe the growth in office space transactions will plateau; however there will be an upward pressure on rentals due to limited quality supply, says the index.

Investors say that new office supply will sparingly hit the market in the coming six months. The year 2016 saw very few new completions in all major cities in the country due to which occupiers were unable to close transactions despite strong demand.

Decoding: What does GST mean for you?

The office markets in key cities have been growing from strength-to-strength in leasing volumes in the past few years. However, due to challenges being faced by the IT sector; a core driver of office leasing in the country, 83 percent of the stakeholders believe that there will not be much increase in leasing space. So transactions will hold steady in the next six months. However, the lack of office space will put an upward pressure on rentals, says the index.

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First Published on May 26, 2017 10:53 am
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