According to the recent data from the Centre for Monitoring Indian Economy (CMIE) has shown the biggest declines in the home loan growth. The growth of the home loan in the duration of April-October decreased by 32.7% as compared to the previous year, which is considered the biggest declines in the past five years. The growth of home loan in the same duration in FY 2016 was fell by 4.27%, whereas in FY 2015 it was enhanced by 26.89%.
Due to the implementation of new Real Estate Regulatory Act (RERA) throughout the country, some of the developers and real estate consultants have registered under this as well as creating uncertainty on the introduction of new indirect tax reform. The consumer’s decision has not improved in past one year even after the reduction in interest rates of home loan.
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Apart from few months of FY 2017, the demonetization effect had influenced the overall growth of market on both ends – supply as well as demand. The home loan growth declined at the same time when the interest rates of the home have been decreased. In the preceding two years, the interest of home loan declined by 150-200 basis points.
According to Anuj Puri which is a chairman of Anarock Property Consultants, a real estate advisory firm. “Three events have slowed down the real estate market in the last one year. First, it was demonetization, then because of RERA new launches came down dramatically. Thirdly, GST has increased the cost. All these have brought down the sentiment and as a result, sales have been slow.” RERA is already implemented in some states such as Maharashtra, Gujarat, and Rajasthan, and in other states are yet to implement which is creating a lot of uncertainties in the customer’s mind. Some of the customers are eagerly waiting for RERA approved building and projects.
Ashutosh Khajuria, Executive director of Federal Bank Ltd, said that, home loan industry adversely influenced with the implementation of two new reforms – RERA and GST in India.
“Consumers will take time to get used to the new (tax) rates due to GST. They will take time to sink in…There is a temporary blip. I think from next financial year it should get better”, said Ashutosh.
Under-construction houses and properties are being levied at 12% GST as compared to the 5.5 percent (inclusive value-added tax and service tax) in the previous tax regime.
Due to the demonetization effect in India, home sales declined by 41% in the duration of October to December in FY 2016 in eight major cities in India as compared to the same period in the preceding year. while launches fell an even sharper by 61%, as per data from property consultant firm Knight Frank
Although, Sales of home started recovering in the first quarter of FY2017. Liases Foras, which is a real- estate developer of another property advisory firm said that sales of home enhanced by 6% in the month of June as compared to past three months.
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According to Boman Irani, Vice-president of Confederation of Real Estate Developers Association of India (Credai), a real estate body. “The first six months of the year were slow. However, we are seeing a huge pick-up since September. We have seen a great comeback and the numbers will improve as we go into the next year.” Irani is also chairman and managing director of Mumbai-based Keystone Realtors Pvt. Ltd that said that the confusion related to RERA Act has resolved in Maharashtra state and it will help in improving the consumer decision in the coming year.
Pritesh Bump, Analyst, Prabhudas Lilladher, a Mumbai-based brokerage firm said, “Real estate market has been down even before RERA came in… Demand for affordable housing is there but the pickup is slow. People may have applied for some of the affordable housing schemes and are still waiting.”
