By: Ravi Sinha
Track2Realty Exclusive: Real estate gains are not always short-term but often long-term from investment point of view. The same can be said about 2013 where despite of an outside view dismissing the year 2013 for low sales velocity, piling inventory, liquidity crunch and policy ambiguity, added to the country moving to the General Elections in 2014, the sector has managed to pave the way for long term reforms.
This has been an year where from policy standpoint a lot has happened which promises to reshape the fortunes of the sector once the elections are over and the economy revives. Last, but not the least, the focus of the developers this year has shifted from more launches to project execution and that shows the paradigm shift in the way the sector has been operating.
Sachin Sandhir, Managing Director, RICS-South Asia agrees that in the last six months, whether it was Land Acquisition Act, whether it was Regulator Bill, whether it was REIT guidelines, suddenly there was plethora of activities and buzz happening in the Finance Ministry and also about the measures that can be taken to get the economy back on track. So, from sales perspective it has been what it was, but looking ahead from the policy perspective there has been some measures which at least give you some element of hope that post elections depending on which way it pans out there would be some progress. He believes some of these developments have the ability to change the market dynamics significantly.
“I think from an activity perspective, particularly with respect to policy, a lot has happened. I can not say the same about the market because the market wise sales velocity has come down significantly. In the last three quarters sales have been down quarter-on-quarter. Mumbai and Delhi-NCR region have been severely affected. But market aside from the policy perspective there has been a clear realisation within various circles that the housing sector needs to be propelled through various mechanism for investment to go into the sector, jobs have to created if the economy has to get back to the growth trajectory of 8-9 per cent and for that housing has to play a significant part,” says Sandhir.
This raises a fundamental question whether the year 2013 has moved forward in terms of policy advocacy in a direction that promises market revival? Neeraj Bansal, Partner, Real Estate & Construction, KPMG maintains from policy perspective there has been a number of initiatives, both at the Central and the regional level, like policy on affordable housing or land pooling. But what has gone wrong is that it has not been cohesively done by taking together all the stake holders. So, the government is sending the mixed signals to the market.
“Even for the REIT guidelines, have they consulted all the stake holders adequately? Are we communicating rightly in terms of what is to be done and what are the pros and cons? So, there is some momentum from the policy side, but the communication is not clear to the market and so it is leaving lot of grey areas which should already have been covered with. You go to the ministry they have their own concern; you go to the consumer forum they have their own concern and there is no proper communication which is actually impacting the market, says Bansal.
Navneet Bhadla, Director, Brys Group agrees that there is a terrible disconnect between the government, the developers and industry bodies, and they are not working in tandem. So, in the year ahead a connect has to be there and it has to researched before making any regulation. According to her, nobody has researched what is the requirement and need of the market.
“We did some research last year and two things we found out: One is the luxury market where the consumer in the segment is not affected by any market slowdown and is buying it as per his needs. But this segment has to be catered very carefully as it is a taste-conscious market. Secondly, there is no dearth of the developers to offer mass housing. But when the policies of the government don’t support them, I feel the role of the developer should be more important in the decision making. The government needs to recognise us and make us part of the decision making process. I think then only we will move in the right direction,” says Bhadla.
Gaurav Gupta, Director, SG Estates says the good part of the year 2013 has been that prices have not gone up in 2013, at least in the last six months. There has been inventory piling up. From the policy side, RBI has become more stringent. A breather that the developers were having with the subvention scheme, that breather has been taken. So, 2013 has not been encouraging year for the developers and the industry bodies have been trying their best to the government but with election year ahead the government had their own methods to do the things.
“On the one hand we say that India needs housing as we are 27 million shortage of housing and on the other hand you are creating such an environment where the land in urban areas would not be available. Second thing, you talk of Real Estate Regulation Bill which again has been brought in so hurry that it does not involve all the stake holders. We need more of a facilitator than a regulator. As for the developers, 2013 has been a very stagnant year where the prices have also been stagnant,” says Gupta.
PK Tripathi, President, Unitech gives a different perspective when he says in 1980s when there was a Licence Raj there was a clear demarcation of mis-trust between the bureaucrat and the industrialist by and large. And today that mis-trust has started again if you look at it closely. In the 1990s it had started changing and now it has come back.
“Where is the channel of open discussion to understand each others’ concerns? I feel the channel of open dialogue is lacking. In this case what happens is that the government agencies listen to some of the demands of the industry bodies and frame the regulations the way they feel is right. It is not good for business and this is what precisely the problem is with real estate policies,” says Tripathi.
The sector by and large agrees that all the pending issues have been done without a proper thought process and suddenly since nothing has been moving for such a long period of time, all these issues have been brought to the table with the hope that things will turn around. The RBI is doing the right thing by control inflation but some of these policy initiatives don’t augur well from sentiment perspective, as real estate and economy in general is sentiment driven. High interest is thus impacting the buyers’ sentiments.
Coming back to the policy since they have not been thought about properly they are impacting the sentiments and overall there is sentiment of ambiguity. So, people are on a wait and watch and that is impacting the market. So, while the year 2013 has been a busy year from policy perspective and promises to reform the sector, it has also hurt the sentiments of both the buyers and the developers and hence everyone is keeping the fingers crossed on the eve of 2014.
