Three major steps were taken by the government in previous year – the Real Estate (Regulation and Development) Act, 2016, Goods and Services Tax (GST), and Demonetisation. The home loan market is facing tough times these days due to the implementation of Goods and Services Tax(GST). Growth in home loans reduced by 10.5 percent in July 2017 as against a growth of 17. 2 per cent in the previous year.
As per the reports of Reserve Bank of India (RBI) housing loan outstanding has increased to Rs 8,63,600 crore in July 2017 from Rs 7,81,600 crore in the same period of last year. The incremental rise in home loans in the period of April-July 2017 was Rs 3,600 crore only.
An official of a public sector bank (PSB) said, “The fall in growth has happened despite a fall in home loan rates. A fall in interest rate doesn’t necessarily mean higher loan offtake. Buyers soft-pedaled after demonetization and GST”.
Anuj Puri, chairman of Anarock Property Consultants, said: “Currently, residential demand is subdued due to the uncertainty caused by many regulatory upheavals” all of which were necessary to make Indian real estate a better marketplace. The government’s unexpected demonetization move last year put a severe dampener on the resale market and also impacted the primary market to some extent. Even as the markets were recovering, RERA and GST “both of which were predicted and expected caused considerable confusion among both developers and buyers.”
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It is widely known that, many builders across the country were demanding for a cash component from the potential buyers. The government removed a cash component factor by putting a cap of Rs 2 lakh on cash transactions, after the demonetization effect.
An official of retail estate industry said, “Buyers backed out soon after demonetization. It’s only recently they have started coming back. Then the RERA was introduced which seeks to address issues like delays, price, quality of construction, title and other changes.” In some of the states such as Uttar Pradesh, Haryana, and Maharashtra, RERA 2016 rules have already been implemented.
RERA Act 2016 rules were already implemented in some states such as Uttar Pradesh, Haryana, and Maharashtra, whereas some of the states are yet to come out with the RERA rules.
Post GST Era, consumers will have to pay the high amount of charge for ready -to -shift flats under the new tax regime, real – estate developers with large unsolved inventories have decided to pass the high tax burden on home buyers.
Chairman and Managing Director, House of Hiranandani, Surendra Hiranandani, said: “The triple impact of demonetization, RERA and now GST have brought dramatic changes in regulatory, tax and business environment in India. The implementation of these landmark developments within a short span of time is bound to create short-term problems till our economy gets accustomed to it. However, in the long term, all these are certain to make the industry more transparent which will boost investors confidence in India.”
RBI announced a credit policy in June 2017, in which the bank reduced a statutory liquidity by 50 basis points (bps) and also reduced the risk weight age on home loans above Rs 75 lakh from 75 percent to 50 percent. In June 2015, SBI also cut down the interest rates on home loans by 10 basis points above Rs 75 lakh, from 8.6 per cent to 8.55 per cent. Recently, in May 2017, SBI also cut down the interest rates on home loans by 25bps below Rs 30 lakh from 8.55 per cent to 8. 35 per cent and home loan on above Rs 30 lakh by 01.10 per cent. Other private banks such as HDFC, ICICI, and several public sector banks (PSBs) are also following a similar trend.
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Reduction of the interest rate on home loans are being offered by the banks to new customers as well as old customers, as such banks are not getting any benefits from this. Several banks including public sector banks ((PSBs) are trying to pay more attention to retail credit especially in home loan loan category.
Puri said, “Taking a good look at the short-term story on the end-user side, the state of upheaval is a result of an enforced maturing process. The turmoil this process brings with it could be compared to the growing pains one experiences during adolescence.”
The biggest reduction in consumer durable loans were slow down from 18.4 percent in July 2016 to 8.5 as against same period in 2017, due to demonetization and GST pushed customer either postponed purchases or not to take any loans. Consumer loan outstanding brings down from Rs 18,800 crore in July 20016 as against Rs 17,200 crore.
Talking about credit growth, small and medium enterprises (SMEs) faced a shrinkage of 3.3 per cent in loan off taking to Rs 3,59,300 crore, whereas medium sized companies stated that 8.7 per cent reduction in credit outstanding to Rs 1,00,500 crore in the 12 months ended in July 2017.
According to RBI, the impact of credit in industry shrink from 0.6 percent in July 2016 percent as against 0.3 percent in the similar period ended in July 2017.
