As Santa Claus time comes closer, I look at the ‘gifts’ that we received in 2017. The positives include the ease of doing business rating, Moody’s giving India a positive ratings update and the GDP growth factor. In the Affordable Housing segment, we expect the PPP model to take off and make a major difference. As we come to the end of 2017, I am reminded of the scene last year: nearing Christmas in 2016, Demonetization had happened recently. This was arguably, the single-most important factor which positively impacted real estate, in terms of encouraging digital payments in real estate transactions. This was just the beginning of a ‘new regulatory regime’ which continued to introduce us to newer regulatory norms through 2017, a year that will be remembered as the year of paradigm change in terms of Indian real estate.
While the year started with demonetization having recently been implemented, the impact continued almost till April 2017. Then we had the Benami Properties Act, followed by RERA and GST – and then, the amendment made to the Bankruptcy and Insolvency Code. This is a list of new regulatory aspects which impacted stakeholders. The paradigm change that these brought about changed how real estate transactions happen. For one, right since Jan 2017 till the festive season started towards the second half, 2017 was largely a year of slow market; slower sales and a ‘wait and watch’ attitude on part of home seekers.
Commercial real estate did well across 2017. To give our own example, we began 2017 by completing Hiranandani Signature, a 16 storey commercial tower with 4 lakh sq. ft. of office space in Gujarat’s GIFT City; similarly towards end-2017, we completed TCS Olympus Centre, 2 million square feet of ‘built to suit’ office space in Hiranandani Estate, Thane. In Panvel, we have arguably the single largest commercial spaces cluster in the MMR being developed within our Panvel layout, some towers are ready for possession. For commercial realty, in 2017 it has done good, should do better in 2018. REITS are still at the ‘take-off’ stage, we hope to see REITS ‘take flight’ in 2018.
Affordable Housing emerged as the driver of real estate growth through 2017, given the initiatives and support from the government. Home Finance also being at record low interest levels provided the extra ‘boost’ needed to ensure that a home seeker finds a ‘dream home’ becoming a reality, with a home loan. With Affordable Housing emerging as the rising star of Indian real estate in 2017, the Government also made efforts to boost the mission of “Housing for All” by 2022. We saw some good moves, like the policy reform under PMAY, which hiked the earlier MIG-1 carpet area of 90 sq m to 120 sq m and the earlier MIG -2 carpet area of 110sqm to 150 sq m. So, in these few aspects, 2017 was positive.
Would one define 2017 as a year favorable for realty buyers, or a year for realty developers? I would not make this an “either – or” scenario. This was truly a year that was favorable – as also challenging – for both, buyers and developers. To begin with, demonetization gave a push to digital payments. Then, the first half of the year saw transactions being put on hold, as stakeholders wanted to see the impact of RERA. Once RERA was implemented, it was GST which was next in line for implementation – effectively, the ‘fence sitters’ moved on to becoming ‘actual buyers’ from the festive season. It followed almost half a year of very slow sales, and the off-take has been slow in moving upwards. At the end of 2017, real estate is moving back towards normalcy, albeit under the new regulatory regime. Talking of which, it has also been a year when safeguards for investors are getting due attention and a more transparent and accountable industry has turned more attractive for FDI.
Did that the events of 2017 bring sustainability to Indian real estate? If one looks at the construction scenario, a combination of global best practices and local working methods would seem to be the apt way of achieving this goal – and Indian real estate largely, has taken this route through 2017. In the new regulatory regime, construction, like other aspects of real estate and the Indian economy, requires proper working methodology, one that is transparent and includes accountability – which will ensure adhering to the new regulatory regime. In this regard, 2017 was by large a year that brought sustainability to Indian construction industry.
It is not just the regulatory regime, tweaking policies as also introducing new policies has been a ‘work in progress’ scenario in India across 2017. Over the years, the industry has been communicating with various governments about changes required in policies so as to give a positive boost to real estate – and we have seen this happen in the ‘affordable housing’ segment. We need such positive changes in policy across all segments of real estate. Some of the required changes have been implemented, some are under ‘serious consideration’ and some are yet to be taken up. So, quicker permissions and clearances, translating ‘ease of doing business’ into the actual process of planning – executing – completing projects, making low cost institutional credit available to the industry. It is a long list, which has largely remained constant through 2017.
Looking into 2018 and the future, rationalization of tax as a result of the move to cover real estate fully under GST, and providing a boost for rental housing are the two key drivers to look forward to. In a nutshell, 2017 for the real estate sector has definitely been good – in the long run. In the short run, it can actually be termed ‘challenging’ – sales and new launches were slow through most of the year, with the ‘revival’ happening from the festive season. Through 2017 and into the future, consumer confidence will grow as a result of RERA, the developers will work in a more transparent manner and be accountable for their projects. Affordable Housing will be the driver of real estate growth, given the initiatives and support from the government. Home Finance is also at record low interest levels, this will ensure that a home seeker will find it to his/ her advantage of buy a home with a home loan. So, 2017 can be summed up as ‘positive’, looking at the long term perspective.
By Niranjan Hiranandani is President, National Real Estate Development Council (NAREDCO), which works under the aegis of Ministry of Housing & Urban Poverty Alleviation, Government of India.
