5 Reasons Why FY17 Will Usher In Realty Revival
The past couple of years have been tough for the real estate sector. Despite best efforts from the government and industry players, steps to urge buyers to loosen their purse strings did not yield the desired result. However, with all stakeholders augmenting measures for a meaningful revival, the financial year (FY) 2016-17 looks promising.
PropGuide takes a look at why FY17 may be different from the previous years for real estate in India.
The return of the native
The theory is simple. To win a game of, say, soccer, a team needs individual players who can perform. While the coach, the advertisers and the spectators would charge up the atmosphere, who takes the trophy home would depend on how the team players fare. By the same token, real estate is no different. Because of rising property prices, the common man had stayed away from the market for a while. Investing in real estate was never an affordable choice, but it had turned much more expensive in recent years.
While rising prices were benefiting investors, they halted the real players of the game -- the end-use consumers -- in their tracks. However, according to PropTiger DataLabs, end users accounted for over 95 per cent of the total housing demand in India during the four quarters of FY16, even as investors stayed away with the sector yielding limited returns. This might augur well for the sector in FY17. The real players are back to help the sector score better.
The best policy
The real estate sector is the second-biggest employment provider in the country, next only to agriculture. Stagnant growth here hits India's overall growth. This is one of the reasons why the government has been on its toes. In his Budget speech for FY17, Finance Minister Arun Jaitley announced an array of policies and measures to improve the buyer sentiment.
What's more? Schemes like 'Housing for All by 2022' and 'Make in India', in the initial stages of their implementation, are set to trigger growth in the sector. States and local authorities are also simplifying their approval processes to make project construction and home buying much simpler. All these efforts could translate into a positive for real estate in FY17.
Out of the woods?
Most news pieces from the real estate sector in FY16 were not encouraging. Across nine major cities of the country, home sales in FY16 declined over 30 per cent from FY15; new launches also declined massively in the same period; prices remained stagnant or rose marginally; unsold inventory swelled up. Despite the best of developers' efforts — which came in the form of discounts, offers and festive schemes — there was little improvement in the situation.
Data show the affordable housing segment accounted for a large part of the inventory pile. However, in all these details lies the indication that FY17, which will see implementation of most regulations mooted in FY16, would usher in good news for the sector.
Restoring confidence
There is a lot of expectation from the Real Estate (Regulation & Development) Bill, 2016. This piece of legislation, the process for implementation of which has already started, is seen changing the way people look at the real estate sector. It may do a yeoman's service in cleaning up the sector by fixing accountability and rights. (The government recently notified 69 of the 92 sections of the Bill.)
By empowering home buyers, the legislation would invite key sector players to rejoin the game. According to the DataLabs, the Bill is “expected to usher in a fundamental shift in the 'way of working' in the sector”.
Cash is the king
In its attempt to spur growth, the Narendra Modi-led government at the Centre made several policy changes since coming to power in May 2014. These measures started paying dividends in the form of better growth figures and foreign investments.
In fact, India overtook China in the rate of economic growth in FY15 and maintained that position in FY16. The overall business environment has improved, too, with non-resident Indians finding it much simpler to make investments in India. The rupee depreciated around six per cent in FY16 over FY15, making investments in real estate cheaper for non-resident Indians. This has set the stage for increased liquidity, which will certainly benefit the cash-strapped sector.