Challenges and Opportunities for Growth of Indian Real Estate Sector in 2018

So finally 2018 year begins, home buyers and home developers are looking forward to a great year. 2017 was a roller-coaster for the Indian real estate sector, with too many things happening around. The effect of demonetization was still visible in 2017. The central government in the Union Budget 2017-18 introduced "Housing for All by 2022"  which came with a number of benefits like availability of prime land parcels, access to funds and fast approval of incentivizing for the affordable housing projects. The government later introduced RERA to bring complete transparency between buyers and sellers. This act has raised the interests of home buyers and confidence among the consumers. Mandatory registration, strong penalties and complete transparency are some of the features of RERA.

Furthermore, the introduction of GST in July 2017 aimed to dismantle multiple tax system. This has helped increase in the FDI and further growth of the industry. In the year 2017, around 1.6 lakh units got sold out, which is 30% drop compared to 2016.

New Beginning in 2018:

As the New Year begins, there is some expectation from both buyers and developers with new government policies. The ultimate aim would be to keep the industry organized and boost the housing segment. In fact, the Real Estate Investment Trust (REIT) will be launched by the first quarter of 2018. Also, there is also the projection of receiving Private Equity (PE) investment of about US $4 billion during the fiscal year. As far as listing down the metro city that would yield a good return to developers, Bangalore tops the list with growth in home selling segment.

Though, there are positive and negative things taking place during, real estate sector will face some challenges and opportunities throughout the year. This article presents you with some of challenges and opportunities for growth in the real estate sector in 2018:

Challenges:

• Facing the Regulatory Pressure:

In 2017, we saw some regulatory rules by the government which impacted the industry, positively and negatively. So in 2018 too, developers will face the impact of RERA, restricting to new construction and focusing more on completing the projects. As the supply of ready-to-move-in properties will increase, developers will face the challenge of completing the project on mentioned deadline.

• Single Window Clearance:

The major obstacle a real estate developer faces is the property clearance and usually takes 18 to 36 months. The majority of delay happens to procure approvals from authorities who take months to reply. Single Window Clearance is the biggest challenge faced by the real estate developers. So implementing this method will not only bring down the project delivery deadline delay but also the cost of the project implementation. By going online, it will boost the transparency and curb the scope of undue gratification.

• Getting limit on Home Loan Interest:

The home loan interest tax is the major issue faced by the home buyers. The government need to raise tax deduction limit for up to 5 lakh from the present 2 lakh per annum. So this will certainly give a huge relax to home buyers in saving money on the home loan.

• The GST Rate:

Since the establishment of GST, the real estate has been facing huge roadblock due to high GST rate. As home buying is a huge investment, the government should bring down the GST rate by 6% to encourage buyers to invest in new projects.

• Rising Input Cost:

Real estate is a capital and labour intensive industry, thus a rise in the cost of labour creates issues in the development of the project. Furthermore, unfair practice of certain sections of distributors and cement industry by raising the price creates issues in the project completion.

Opportunities:

• Major Focus on Selling and Delivery:

In the year 2018, developers will majorly focus on selling and completing the existing projects within the deadline. Hence, the year 2018 will witness major sales  and delivery in the residential market. RERA has given opportunities to developers to stay transparent and complete the project by the mentioned deadline.

• Various Tax Incentives:

Government is doing its best to boost the source of 'affordable housing' through various tax incentives and other reforms. Union Cabinet has decided to increase the carpet area of the unit like 120 sq.m and 150 sq.m for MIG-I (income category of 6-12 lakhs) MIG-II (category of 12-18 lakhs pa). This will also come with interest subsidy of 4%, further boosting buying and selling of a home.

• Past year reforms to shape the future:

There have been many reforms set by the government, including RERA and GST which will affect the industry in 2018 too. For both, home buyers and real estate developers, these reforms will change the face of the industry. There are some big questions from home buyers regarding the project which is under-construction or readily available. With complete transparency, home buyers and developers can have an easy business.

• Clean Capital:

Due to lack of transparency in the sector, it was difficult to get clean capital from financial institutes. But times have changed since RERA and Demonetization have come to the effect there has been a complete change in the process of buying and selling of a home. Investors and financial institutes have opened up the avenue for clean capital. This certainly shows the positive picture in 2018.

• Pradhan Mantri Awas Yojana (PMAY) to shape up Housing for All-

The ambitious plan of Prime Minister's to build homes for all by 2022 will certainly bring a major change in economic with $1.3 trillion. This will create 60 million new houses and 2 million jobs over the next 4-5 years. Every project is now getting registered under PMAY scheme; the urban realty sector will see a major boost in 2018. Affordable housing could emerge as the defining trend in 2018.

Final Verdict:

With more and more FDI, government schemes and transparency, the real estate sector in India is set to change dramatically. Though there are challenges and opportunities for developers and home buyers, according to which they need to plan out for easy flow and have a positive long-term effect.