Why 2017 Is The Best Year For Real Estate

The year 2017 started on a good note for the real estate industry, with a series of prominent reforms announced by the government. Transparency, better organisation, and enhanced credibility are expected to be the keywords for the sector this year. Demonetisation was a good shock for the real estate industry, which has further put the brakes on inflated property prices and has discouraged unorganised players.

Additionally, developers across the country are working hard to woo back buyers through discounts and incentives, innovative deals, and intense attention to timely project delivery and quality construction work. This makes 2017 a good year for real estate investments.

Prices have already corrected and unlikely to correct further

Prices have not increased now for 2-3 years in all major markets, which means in real terms prices have already corrected by 25 percent – 30 percent depending on area. The prices are unlikely to fall further as there is revival of demand and also the fact that construction is becoming expensive (inflationary). There are also offers and schemes which are time bound. Excess inventory (especially ready to move) is coming down in most cities.

Developers with access to foreign capital and formal bank financing are likely to complete projects faster. In most resale localities, prices are already at a historical low and sellers may not sell unless there is major financial duress. The budget 2017 has capped interest rebate to a maximum of INR 2 lakhs for 2nd home buyers (“investors”) which also means there will be genuine consumers entering the market with real housing need who are unlikely to wait longer.

Lower interest rates

Home loan interest rates (at 8.3 percent p.a.) are currently at their lowest in several years. Banks and other lending agencies have reduced their rates on the back of surplus liquidity and lower cost of funds, prompted by demonetisation. Additionally, the interest subsidies announced by the government under Pradhan Mantri Awas Yojana (PMAY) have further slashed EMIs for the urban poor by around 40 percent, making home loans much more affordable.

RERA and consumer protection

The buyer-friendly provisions of RERA have the power to revolutionise the sector and has shifted power to the genuine buyers. With several states rushing to set up realty regulators, real estate consumers can expect the market to become disciplined and transparent, and developers to take accountability with respect to promised deadlines. Once RERA is in place, buyers can look forward to timely completion and possessions as well as faster redressal of grievances. Risks of construction delays are also minimized as there are stiff penalties, so buyers can have peace of mind while buying under-construction property. New launches are also expected to increase in 2017 and give more choices to buyers - especially in the under INR 50 lakhs bracket.

Budget 2017

The Union Budget 2017-18’s biggest pro-investor policies announced were relaxing the capital gains tax structure and doing away with the existing Foreign Investment Promotion Board (FIPB) in favour of a new FDI policy. These measures would aid in enhancing the transparency in the sector and attracting greater investments. Better infrastructure especially in top 7 and the smart cities means more appreciation possibilities for real estate.