27/01/17 6:46 pmReal Estate News | Latest Realty & Real Estate Industry Information and Updates: ET Realty

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2016 has also been the year of strategic policyinitiatives, the broader objective being the creation of aconducive economic system that would boost long-term industrial growth and improve ease of business.Specific to the sector, the Real Estate Act 2016, with itsthrust on transparency, accountability and theprotection of home buyer interests, seeks to empowerall stakeholders engaged in the business andconsumption of real estate. The Benami Transactions(Prohibition) Amendment Act, 2016, establishes aregulatory mechanism to further strengthen the fightagainst tax evasion and improve transparency. Yetother announcements, such as the exemption ofDividend Distribution Tax (DDT) for SPVs to REITs andrelaxation of FDI norms, were aimed at improvingfinancing to the sector.

As last year, affordable housing continued to attractsignificant attention, driven by continued andaccelerating urbanisation, rising home ownershipaspirations and an urban housing shortage estimatedat 18.8 million units as per the ‘White Paper - IndianHousing Industry’ by research and consultancy firmRNCOS. 100 per cent deduction in profits forconstruction of affordable housing (upto 30 sq. mtr. inthe four Indian metros and 60 sq. mtr. in other cities)and interest subsidy for first-time homebuyers, aresome of the initiatives that were introduced to improvesupply and spur construction activity in the segment.

In the month of November, 2016, the Indian economywitnessed a major shake-up, set in motion by thewithdrawal of legal tender character of high-valuecurrency notes. There has been much debate on thepros and cons of demonetisation and itscomprehensive impact. The immediate impactcontinues to be felt across many industries andsectors, as manifest in a drop in consumption spends

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27/01/17 6:46 pmReal Estate News | Latest Realty & Real Estate Industry Information and Updates: ET Realty

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and growth rates in the near term. From a real estateperspective, the short-midterm impact ofdemonetisation is expected to vary across regions, asthe sector is fairly localised in nature. With intendinghome buyers likely to adopt a ‘wait and watch’approach, it appears as though we might witness atemporary slowdown in the sector till the economyadjusts to a new normal.

While the primary market in tier I cities is expected toremain largely unaffected, the tier-II and tier-III marketsmight be impacted to a higher degree, along with theluxury segment. However, demand for affordablehousing is unlikely to be significantly impacted bydemonetisation, since the cash component in thesegment is typically minimal and transactions areprimarily routed through bank borrowings. Though it’sdifficult to predict the impact of demonetization at thisstage on real estate sector including affordable housingsegment.

2017: A year of Change

Growing cities - The fact remains that India’s cities aregrowing and will continue to do so, driven byurbanisation, rising disposable income and mountingconsumption of goods and services. Demonetisationnotwithstanding, therefore, the demand for qualityhousing that is strategically located and attractivelypriced will sustain. From the perspective of resultantpricing shifts, cities and micro-markets that are enduser driven are likely to remain stable. For intendinghome buyers, the new year has already started on apositive note, with some banks lowering their lendingrates and more borrowers now eligible for loans andreduction in home loan EMIs, in addition to reducedtenures for existing borrowers, wherever applicable.This softening of interest rates bodes well for thegrowth of the real estate sector.

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The evolving home buyer - While it’s difficult topredict the sector’s journey through the new year inexacting detail at this point, home buyer preference forinstitutionalized developers with demonstrated trackrecord and good governance framework will likelystrengthen in 2017. This is especially relevant given theevolving customer profile, larger share of home loancustomers and practices that are followed with respectto no undervaluation of properties or payments in cash(by such real estate developers). We believe real estatemarkets across India are maturing and will increasinglybe end user driven, going forward. In fact, over the pasttwo quarters or so, end users have been activelypursuing options, with closure rates improving forright-priced projects in good locations.

GST - An important and game-changing reform thatmerits special mention is GST or Goods and ServicesTax, expected to be rolled out in 2017. Whenimplemented, GST will subsume a series of centraltaxes and state-level levies, and could benefit thenation in the long term, by way of a wider tax base andgreater participation in the formal economy.

Sustainable urban development - Green buildings, ordevelopments that are resource-conscious, areincreasingly finding flavour with consumers in India;this is on account of increasing awareness of both thelong term benefits to the environment anddemonstrated savings in operational (utilities) costs ofsuch buildings. And yet, India’s cities have a far smallerproportion of green developments, when compared toother developed countries – the US or the UK, forinstance. Incentives and tax benefits can contribute tostakeholder buy-in and improve the pace and scale of‘green’ development. We believe that green andinclusive urbanisation that encompassed the entirelifecycle of buildings (from construction, to operations