Impact of Covid-19 Second Wave on Realty Sector

Indian Real Estate 2019: A Wrap Up

The Indian real estate industry has had a mixed year so far. In 2019, the government announced a slew of policies and measures to provide a shot in the arm for the sector. However, as with all long-term propositions, it will take time to see their impact.

We look back at 2019 and summarise the key events pertaining to the real estate industry.

Lower GST

In April, the government slashed GST rates from 12% to 5% for properties under construction in a bid to spur momentum. Affordable housing attracted a GST of 8%, and this was lowered to 1%, which brought homebuyers considerable relief.

Consequently, the cost of ownership was reduced, which is hoped to push sales in the affordable segment.

Ending subvention schemes

In mid-2019, the National Housing Board (NHB) directed all housing finance companies to do away with subvention schemes, which impacted the real estate industry as well as buyers adversely. In a subvention scheme, the buyer pays a certain percentage of amount upfront as a booking fee, and the developer pays the EMI for the buyer for a certain duration.

The NHB issued the directive after several complaints surfaced of developers committing fraud and defaulting on loans, rising speculative demand for housing, and a general lack of transparency.

Model Tenancy Act

According to market reports, there are 11.09 million houses lying unoccupied across India. The draft Model Tenancy Act, 2019, aims to balance demand and supply by making the rental process smoother for both homeowners and tenants.

Some of the provisions of the Act include making a rental agreement mandatory, outlining policies to manage evictions and overstaying tenants, restricting security deposits and rent increases, and creating a forum for rent disputes. With these reforms, the Act hopes to make the rental segment more transparent as well as dissolve unsold inventory.

Low repo rate

In an attempt to encourage growth and ease liquidity, the RBI cut repo rates multiple times this year. Currently, it stands at 5.15%, but the benefit of the lower rates have not been passed on to the consumers through a corresponding reduction in home loan interest rates. Industry experts opine that lower home loan interest rates would help boost demand, which would balance the current surplus supply and also push up the overall economy.

Alternate Investment Fund (AIF)

Finance Minister Nirmala Sitharaman recently announced a bailout of sorts of Rs 25,000 crores to rescue the ailing real estate industry. The government will invest Rs 10,000 crores while Rs 15,000 crores will come from SBI and LIC and the total will be deposited in a specially created Alternate Investment Fund (AIF).

The government aims to provide priority funding and enable the completion of 1,600 housing projects with 4.58 lakh units that stand incomplete in India today.

What’s in store for 2020?

Real estate industry experts predict that commercial real estate shows more hope of recovery than the residential sector. As outsourcing grows, and more multinational companies set up offices in India, demand is only expected to increase.

However, with the measures announced in 2019, the government and the real estate industry hope that, for the industry overall, the road ahead into 2020 will be smoother than the year that went by. 

3 Comments

  1. The real estate sector is one of the most globally recognized sectors. Real estate sector comprises four sub sectors – housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.
    It is also expected that this sector will incur more non-resident Indian (NRI) investments in both the short term and the long term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

  2. The real estate sector is one of the most globally recognized sectors. Real estate sector comprises four sub sectors – housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

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