Uncertainty Around Realty Only Short Term; Positive Sentiments to Take Over Soon: PropTiger DataLabs

Changes, abrupt or planned, lead to reorganising of the existing system, and often encourage negative sentiments in the beginning.  India's real estate sector would tell you that. Many changes were made involving the sector in 2016. At a time when the sector was battling tough times, key legislations — the Real Estate (Regulation & Development) Act, 2016, the Goods and Services Tax Constitutional Amendment Bill, the Benami Transactions (Prohibition) Amendment Bill, 2015 —  were passed. While the sector slowly worked towards adopting the changes, Prime Minister Narendra Modi on November 8 announced a ban on high-value currency notes, taking all by surprise.

As a result, India's real estate took a hit.

"The residential real estate across top Indian cities witnessed a slowdown in November and December as buyers postponed their buying decisions due to uncertainty in the market," says a PropTiger DataLabs report titled, 2016-The Landmark Year for Real Estate & What Lies Ahead.

However, terming it a "bold" move that would be a "turning point in the history of economic reforms in India", the report adds that PM Modi's demonetisation will take India's real estate sector towards long-term growth.

"The much-needed cleansing of the sector will set the ground for growth, based on sound fundamentals. It is expected to lead the beginning of a new era of cashless real estate economy which will boost the sentiment, and, hence the demand in the medium to long term… The impact of demonetisation is expected to fade as we move in the April-June quarter of the financial year 2017-18," says the report.

"The excess cash flows and the likely reduction in liability of the Reserve Bank of India and tax inflow on account of income declaration scheme are expected to provide ammunition to the government to announce measures to boost Investment and hence demand for housing," the report adds further.

"The SOPs in the form of schemes for affordable housing, exemption on interest for home loans for economically weaker sections and government's major decision to ensure homes for the economically weaker sections of the society with 33 per cent increase in the number of houses to be built under PMAY hint at a much lower interest regime which will power the housing demand," the report adds.

The increased government spending on infrastructural schemes such as the Pradhan Mantri Awas Yojana and the Smart Cities Mission will further fuel the demand.

And, what would be the likely impact of states across the country implementing the real estate law? According to the report, new launches will take a hit but strong developers will come forward and "unorganised brokers would need to look out for other means of livelihood".

As the sector gains more transparency and buyers feel protected, fence-sitters would enter the market and consider a purchase. "Investors, who want to take a long-term bet on the Indian real estate, would consider it the right time to invest in residential real estate," the report says.