2017- A Year Of Challenges For Real Estate Sector

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Home ? Blogs ? 2017- A year of challenges for
real estate sector 2017- A Year Of Challenges
For Real Estate Sector In Green
Homes
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2017 has been an action-packed year for real
estate sector. It started slow note, the real
estate sector still reeling the shock of the
demonetization which is a policy measure
announced by the government in November 2016 to
?ush-out the black money from the
economy. Demonetization has the negative impact
on both, home sales and home launches. In a prime
couple of quarters following the demonetization,
demand for homes and new home launches was muted
across India. The resale or the secondary market
was hit much more than the primary market as of
the predominance of the cash transactions in the
resale market. The transaction in the secondary
real estate market fell by somewhat 50. Demand
for the affordable homes was comparatively
better than that of the luxurious homes which
have again have a high component of a cash
transaction. Demonetization in effect squeezed
liquidity out of the developers which forces them
to change the business models. For example, the
developers now prefer to enter the joint
development agreement with the landowners over
the outright land purchase. The sector began to
recover the second half of 2017. From the home
buyers point of view, the positive impact of
demonetization is fall in home prices and home
loan rates. The prices of land are, however,
expected to remain similar. Another positive
effect of the reform measure is actually the
increase in tax and regulation compliance though
how much of this would really translate into the
tax collection which needs to be seen. Also, the
year saw apex court of India to come to the
rescue of the distraught buyers of homes in
multiple cases ?ling against the developers. RERA
is expected to take utmost care of all the
future home buyer grievances. It certainly a year
of changes for the sector with the execution of
the two historic legislation, the real estate
regulations and Development Act, 2016 as well as
the Goods and Services Tax (GST). The business
has to be realigned to comply with stringent
rules of GST and RERA. The new project launches
have certainly slowed down and the home rates
seem to be under the pressure. RERA has increased
both the cost of developers and compliance
level. Demand for luxury homes has taken the hit
while the affordable homes continue to attract
the buyers. It is pretty di?cult to quantify the
accurate impact of GST on the rates of property.
While the developers will be able to bene?t from
the input credit on good and services ought and
used during the process of construction, we need
to see that they will pass on this bene?t to the
home buyers. Nevertheless, GST s expected to
advantage the affordable housing. The new regime
of tax is expected to keep the cost of real
estate low for the segment of affordable
housing, thus making it cheaper. In o?ce spaces,
strong economic growth sustained to generate the
demand. The vacancy levels in cities like
Chennai, Bangalore, Pune, and Hyderabad is over
5-10 while the pan India vacancy is at around
14-15. On the side of the supply, there is a
shortage of grade A o?ce space. It is lesser
than the half of present o?ce stock across the
top eight cities at 280 million
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