Housing Sales May Rise By 12-15% This Festive Season, Half Of Normal: Anuj Puri

While the real estate sector has staged good recovery from the Demonetization (DeMo) days, it is still battling a number of issues ranging from piled up inventories to liquidity crunch and many others. In an exclusive interview to RealtynInfra.com, Anuj Puri, Chairman, ANAROCK Property Consultants, shares his views on the some of the most relevant aspects of the industry:    

Ques: How is housing sales expected to be in the second half of the current year? What is the expectation about sales during the festive season?

This year's festive season coincides with a generalized slowdown in the economy and a prolonged slump in the housing market. Though subvention schemes have been disallowed now, developers will roll out various offers and discounts to try and generate sales momentum. These will work to some extent as many serious buyers in India do try to align their property purchases with the auspicious days in the festive season.

However, the reasons why sales have been slow in the first place cannot be wished away. It is therefore unlikely that we will see any major uptick in sales this year. Where increase in sales during the festive season is usually as high as 25-30 percent, this year may not see an uptick higher than 12-15 percent.

Ques: What is the current situation about liquidity in the real estate sector, especially now when subvention schemes have been barred by National Housing Bank?

Subvention schemes were not as large a factor as was initially assumed, since only 8 percent of a total of 280 housing projects launched in second quarter of 2019 were actually affected. To be more specific, only 7,620 units in 23 projects had subvention schemes - a mere 11 percent of the total 69,000 units launched across top cities.

That said, India’s residential real estate market is still held hostage by the double whammy of liquidity crisis and incomplete projects. As per ANAROCK research, around 1.74 lakh homes in 220 projects across the top seven cities in the country are completely stalled.

A demand to create stress-asset fund has been put before the government previously also as the sector has been reeling under one of its worst liquidity crises. By creating stress-asset fund, the government will help bail out lakhs of distressed homebuyers and thus aid many developers to complete their stuck projects. It will thus unleash the sector of its woes of stalled projects.

The central government is also considering the creation of this fund to finance the completion of pending projects and restore faith in the sector. It remains to be seen if and when such a stress fund is created but it will certainly inject fresh funds, confidence and vigour into the residential market

Many developers facing a liquidity crisis are diluting their equity locked in land to complete unfinished projects. Several realty firms have signed JDAs to monetize their land and joined forces with stronger developers who have financial bandwidth as well development capability. This trend is particularly visible in the National Capital Region (NCR), where developers owning large land parcels are warming up to partnerships to complete stuck projects.

Ques There is talk of overall economic slowdown in the economy. How do you see it impacting the real estate sector which has already been struggling with its own slowdown for the past few years?

The economic slowdown has a direct correlation to employment creation and job security in India. Cash-conservation is the order of the day because Indians are unsure of getting or retaining jobs. The problem of low job creation looms large in India, even though the economic growth rate is predicted to be the highest.

The Periodic Labour Force Survey (PLFS) by the National Sample Survey Office (NSSO) maintained that the unemployment rate in both urban and rural India combined stood at 6.1 percent in financial year 2017-18. A stagnant formal job market has a direct impact on the sentiment of homebuyers who have to make large investments in buying a residential property. The job market situation will eventually improve, but not overnight.

Until it does, demand is unlikely to pick up in any market-significant way unless the government bails the sector out in some way. A massive reduction in GST on under-construction homes coupled with significantly reduced bank loan rates and added incentives for homebuyers as well as investors would, theoretically, be helpful - but even such measures would be of little avail if the job situation doesn't improve.