Hit hard by the slowdown in the property market as well as the introduction of various policy reforms by the Modi government, the real estate sector is betting big on this year’s festive season for revival of fortunes. And not without reasons.
Property consultants say that traditionally, the festive season, or the Q4 of any calendar year in India, has been the highest point on the sales chart of almost every industry, and real estate is no exception. This period has always been an active timeframe for real estate sales as many buyers consider Navratri and Diwali as auspicious occasions to buy a piece of property. Besides, there are many other reasons also which give a boost to the sales of property during this season.
“Through the years, for instance, the release of employees’ annual bonuses has always happened in this quarter, spiking up disposable income and unleashing significantly higher spending power, riding on the back of the festive sentiments. Real estate, automobiles, consumer goods et al have always looked forward to this time period each year, to make their annual sales volumes look respectable,” says Tanuj Shori, Founder and CEO, Square Yards.
In line with the previous years, real estate developers have this year also sweetened property transactions with up-front discounts, most common among them being 0% GST (not charged anyway on ready-to-move-in homes) and waived stamp duty and registration charges. Other freebies such as exclusive car parking space, fittings and furnishing, consumer electronics and even holidays have made appearances in property advertisements.
On the consumer side, there is substantial pent-up demand for housing and where the pricing is right and on-time delivery is guaranteed by the previous track record of a builder, sales are quite healthy. Also, the reduction in home loan interest rates now linked to the repo rates will encourage buyers to consider a home purchase this festive season.
However, the prevalent mood this season is one of cautious optimism, as we are still some way from a full-fledged revival of the sector. There are reasons for this.
“The ongoing liquidity crunch brought about by the crisis in the lending space, coupled with the NHB directive on subvention schemes, has cut off builders’ access to working capital. Revised GST rates sans input credit have diminished profit margins drastically, and clubbed with high raw material costs, leave no scope for further price reductions this season, but the future holds out hope,” informs Shori.
For instance, the creation of a special window of Rs 10,000 crore for last-mile funding of distressed affordable and mid-segment homes, slashing the corporate tax rates to 25.17% (inclusive of cess and surcharge) from an earlier 30%, and an additional Rs 20,000 crore allotted to HFCs by the NHB to increase liquidity, will have a positive long-term effect on real estate.
“This long-term reform-induced push will primarily attract end-users; but a lot more must be done to revive an industry which has always relied on high investor activity to drive sales velocities,” says Shori.
Whatever be the case, property developers are hopeful that the fortunes of real estate will revive during the current festive season.
Lindsay Bernard Rodrigues, Co-owner and Director of Goa- based Bennet & Bernard Custom Homes, says, that traditionally, the festive season is considered auspicious to make purchases of investments such as homes as buyers associate the festive season with security and prosperity. Rightly so, as a home is an investment that offers security.
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Source: FINANCIAL EXPRESS