Changes in the Indian Real Estate Sector Post the Introduction of GST & RERA

Rahul Shah, CEO, Sumer GroupIndian Real Estate sector has been at the receiving end of several landmark Government decisions and policies like demonetization, introduction of the Real Estate Regulatory Authority (RERA) and the roll out of GST. All these announcements put together did have a material impact on how the sector has fared thus far. The sector has witnessed a rather flat two quarters this financial year. However, reports are emerging from across the nation that the enquiries have begun to slightly increase and developers are hopeful that these enquiries would eventually culminate into a sale in the coming quarters. The affordable housing space across all major metros has shown promising growth, while the mid and luxury segment growth remains flat. There is no doubt that the secondary property market has taken a hit during the mentioned period, as it is a well-known fact that a majority of transactions used to take place in the form of cash.

As far as consumers are concerned, they feel a lot more empowered today - thanks to the roll out of RERA and GST. The transparency has definitely improved, and going forward, we believe that these reforms will have positive impact on the sector. This will facilitate to increase the consumer confidence and also weed out unorganized developers. There is also a widespread speculation that the GST has forced consumers to shell out more in pursuit of their dream house. However, the benefit from input cost credit which the developer will have to pass on to the consumer will net off the overall impact the GST might have had if any. It should only be a matter of time that the industry will be back on its feet as it is imperative for the overall growth of the economy.
There is a lot of buzz with regards to affordable housing. Does this segment attract many developers?
Affordable housing is a very interesting proposition for both developers and consumers. There is huge demand as far as the consumers are concerned and the demand needs to be met. The momentum in this segment is expected to continue with the Government planning to deliver 1.2 crore affordable houses by 2022. However, this will be a challenge in metro cities like Mumbai where the land acquisition cost is mammoth. A recent report from a leading consultant says that affordable housing has seen a jump of 27 percent with Mumbai taking the lead.

Millennials today are now exploring the idea of moving into a compact house or a budget 1 BHK house which is closer to their workplace, thus avoiding the tiresome commute

If I were to give an example, budget homes or 1 BHK homes are back in contention in a city like Mumbai. On an average, a Mumbaikar spends 1.5-2 hours commuting from his home to his workplace. Millennials today are now exploring the idea of moving into a compact house or a budget 1 BHK house which is closer to their workplace thus avoiding the tiresome commute. Developers in Mumbai are already latching on to this opportunity and are exploring options of developing such homes.

The city of Mumbai is seeing huge infrastructural push. Do you think this would aid the real estate sector?
The Mumbai infra initiatives will start reaching completion/significant progress milestones in 2019. Visible progress on these city-wide upgrades is likely to be positive for real estate demand, including eventually demand from investors. Developers are sure to benefit from this infra push. Thanks to the Union Government of India and The Government of Maharashtra, several infrastructure projects have made significant inroads in the last couple of years. The notable ones being various metro rail phases, The Mumbai Trans Harbour Link, The Navi Mumbai airport and various road connectivity enhancement measures to BKC. Currently, Mumbai has a 20 km metro and monorail line operational and another 135 km line is under execution. The current Mumbai International Airport is operating at full capacity of 45m. This calls for a speedy development of the Navi Mumbai airport which is expected to have an increased capacity of 60m.

This significant infrastructural push will lead to new business districts over time. Good connectivity would significantly reduce travel time and would trigger expansion in terms of housing as well. Everything put together, the proposed and currently underway infrastructural projects would certainly boost the real estate sector.