Real estate market lures a number of potential buyers and is usually considered a safe bet by the investors. As a matter of fact, this sector too has its highs and lows just like any other market. For instance, there was a boom in the realty sector from 1988-1994. On the other hand, the market was stagnant during the year 2002. Pawan Kumar Dhoot, M.D. Dhoot Group, one of the leading realty entities highlights that it is imperative for the investors to consider certain factors before investing in this sector.
At present, the number of people buying residential properties has decreased drastically. The increase in the property prices compared to the average income of individuals is one of the major reasons for this. Thus, there arises a dire need to induce the concept of affordability in the real estate prices.
The level of demand is also determined by Rental yield (the amount of rent paid per annum over the cost of buying a property). People prefer buying their own home over living in a rented property if the rent is higher than the EMI to be paid for purchasing a property. There is a direct relationship between rental yields and the level of demand. In other words, the demand tends to increase if the rental yields are high.
According to Pawan Kumar Dhoot, Managing Director of Dhoot Group, the real estate market is a speculative market and thus moves in cycles. Talking about the present state of the market, he anticipated that the current correction phase will last for a few more years. The stagnancy in the realty sector has resulted in a number of unsold inventories. There has also been an increase in the cost of construction over the past few years. The increase in cost during diminishing demand has pressurized the developers to lower down their prices.
In such critical situations, it becomes important for the investors to undergo a comprehensive study of the market in order to ensure great returns and make the best use of their resources.
With the implementation of the new real estate regulatory bill, realty sales are expected to rise by 10% and the new home launches are expected to decrease by 20%. Foreign direct investment into the real estate sector is also expected to increase by 20%. The bill is likely to boost realty sales and safeguard the interest of the buyers.
The Real Estate (Regulation and Development) Act 2016 passed on 25th March 2016 has brought in cheer for the real estate sector. Dhoot Group, a prominent name in the realty sector highlights that it has brought the much-needed transparency and accountability in the real estate industry.
The act has safeguarded the interest of the buyers as it restricts the developers to sell their homes before getting all the project approvals. It increases the cost of capital for the developers as they will have to look for equity rather than structured debt to finance the land.
Dhoot Group developers further stated that such an act was much needed in a sector known for deceitful and fraudulent dealings. However, the prices of houses will not fluctuate as the rise in cost of capital will not be passed on to the buyers by the developers in the present scenario of unfavorable market conditions. It is expected that the banks will start funding for land purchases as well. The individual or group investors, who usually invest in residential properties with an intention to withdraw even before the project is completed, can now participate as lenders and not as investors.
The real estate sector of India, especially residential sector, which has been stagnant since last couple of years, is likely to rebound in the coming months. The steps taken by the government to bring transparency in the real estate sector will boost the sector in long run.
The stagnancy in the realty sector resulted in high inventory levels, diminished demand and limited liquidity saw sales and prices plummet, impacting new launches in the past few years. Dhoot Group, a prominent name in the real estate sector highlights that the introduction of much needed changes in the economy and various initiatives announced by the government will bring in cheer for the realty sector.
According to a JLL report, as per statistics, new residential project launches reduced by 6 per cent in Jan-March 2016 period over Oct-Dec 2015. For FY 2015-16, the number of new launches stood at 1,81,294 units compared to 2,16,082 units in FY 2014-15, equaling a drop of 16 per cent.
Overall residential sales were down in the FY 2015-16 compared to FY 2014-15. As per recent data, 1, 58,211 units were sold in FY 2015-16 vs. 1, 61,875 units sold in FY 2014-15, which is a drop of 2.2 per cent. However, a positive twist to this otherwise grim situation is the rise in sales in Q1CY2016. This quarter saw a sale of 42,521 units compared to 39,001 units sold in Q4CY2015 – an increase of 9 per cent.
Talking about the Real Estate Regulation and Development Act 2016, Pawan Kumar Dhoot asserted that it will bring in the much needed transparency in the realty sector and safeguard the interest of home buyers. He further added that the act will encourage investments from foreign and domestic financial institutions as well as increase the credibility of developers.
The Real Estate Sector has not been performing adequately from a long time and the proposal of RBI Governor Raghuram Rajan is not favored by the Realtors in context of lowering property prices to encourage more people to buy.
It is due to increasing unsold stocks and delays in project completions the industry is facing slowdown and reducing more prices would surge chaos as according to Confederation of Real Estate Developers’ Associations of India (CREDAI) president, Getamber Anand price of 90 per cent of the residential supply in the country has already corrected. “If prices fall further, it will lead to non-performing assets (NPAs) and non-delivery of projects,” says Anand.
Pawan Kumar Dhoot, Managing Director, Dhoot Group also holds the same sentiment as according to him it is not a viable option to uplift the prevalent slump in the sector. He explains RBI has already offered deduction by 1.5 per cent cumulatively since January last year and earlier this month the policy rate was cut by 0.25 per cent to 6.5 per cent which is lowest level in more than five years.
Getamber Anand also clarifies the RBI statement by saying “His (RBI Governor) statement should not be taken out of context as he has recommended an adjustment and not necessarily a price cut. The adjustment could be through other ways like easy payment scheme to attract home buyers.”
Amongst all the dialect, the main aim of RBI Governor is to encourage investment in the real estate industry which according to him can be achieved if convenience is on investor’s side for which he adds, “There is an issue of certainly how they see the housing market and how they see prices. There has to be an adjustment so that more people want to go and buy.”
CREDAI(Confederation of Real Estate Developers Association of India) has decided of making skilled construction worker which is necessary for the upliftment of real estate sector and Dhoot Group is supporting its decision. With the commencement of Real Estate Regulatory Bill, there is a constant murmuring in the sector regarding its pros and cons. Though government’s effort to build a foundation for the betterment of investors is extraordinary hitherto there is less said or done for developers.
To come in support for the Bill, CREDAI aims to attempt skilling of one lakh construction employees each year. Pawan Kumar Dhoot, CMD, Dhoot Group is in alignment with CREDAI opinion as if the roots are managed properly. There is no doubt that a tree will be loaded with sweet fruits, thence if the workers are proficient in their skills then there is no stop for a strong and mighty construction.
The association is not only good at words but work as well, as it has already trained more than 26,000 employees across India. Based on KPMG report for that National Skill Development Corporation (NSDC), there is going to be proximate demand of additional 500 lakh skilled toilers in next ten years consequently CREDAI effort is well appreciated.
Following continuous ruin in industry, financial specialists may get paid for their determination and detachment soon. As indicated by Pawan Kumar Dhoot, Managing Director, Dhoot Group, year 2016 may get cheer land part, with venture of proximate 1 trillion USD; a surge in property procurement is examined. According to CBRE’s Global Investor Survey directed amongst January and early February larger part of purchasers i.e. 82% opined to either stay same as in earlier year or expansion obtaining exercises this year.
Pawan Kumar Dhoot likewise presented the perspectives of the Chairman and Managing Director of CBRE South Asia, who said, “Real Estate remains a critical resource class for residential and abroad financial specialists. The year 2016 guarantees to be a decent one for the business and it is normal that India’s land area will get some advantage, though a little share, of the worldwide land venture stores,”.
Since the real estate industry has various governments’ contribution lined up in name of Real Estate Regulation Bill or Housing for all scheme at affordable prices, it is less likely that people would not find interest in this sector and it is time for developers to gear up and put in their all efforts to meet the accruing demand.
The Real Estate (Regulation and Development) Bill has been passed by the Rajya Sabha as well as the Lok Sabha it is set to become an act in a few months. Once passed it will change the way Real Estate was being dealt with, in the past.
The new act is a blessing as it will bring and safety for the home buyers in the city with the regulator being mandated to ensure this.This is also a blessing in disguise for the developers as it will bring credibility to them and people including NRIs will be willing to invest their funds in this sector.
Under the provisions of new bill any project over 500 sq mt area or 8 flats must be registered with regulatory authority with full disclosure – details of promoters, project, layout plan, plan of development works, land status, status of statutory approvals, etc. as well as the details of their past and ongoing projects. New projects can be launched only after the developer secures all statutory clearances from relevant authorities and the promoter must upload details of the project on the website of the RERA.
The bill bars the promoter from altering plans, structural designs and specifications of the plot, apartment or building without the consent of two-third allottees after disclosure.
The bill also seeks to establish fast track dispute resolution mechanisms for settlement of disputes through adjudicating officers and Appellate Tribunal. Consumer courts are allowed to hear real estate matters. There are 644 consumer courts in the country. The more avenues for grievance redressal would mean lower litigation costs for the buyers. Appellate Tribunals will now be required to adjudicate cases in 60 days.Any developer who violates the order of the appellate tribunal can be jailed for three years or fined or both.
Currently, if a project is delayed, then the developer does not suffer in any way. Now, the law ensures that any delay in project completion will make the developer liable to pay the same interest as the EMI being paid by the consumer to the bank back to the consumer.
The bill specifies that in case there is substitution of developer or builder, the new promoter will assume all the liabilities and the change won’t trigger any extension of the deadline. The buyer will have the right to get all details of the project including government approvals and floor plan besides quarterly progress. The bill mentions the regulator won’t extend the deadline for completion of project beyond one year in normal circumstances.