“I used to close around 5-6 property deals a month during 2011-2012. The numbers have now shrunk to 1-2 per month,” says a senior real estate consultant with a leading financial institution in Delhi-NCR, when asked about the status of the industry in recent times. The gradual fall in the fortunes of the sector over the last couple of years has failed to halt despite the big-bang announcements and promises by the NDA government on reforms across sectors including ease of doing business. The first year of the Narendra Modi government witnessed two policy rate cuts of 25 basis points each by the Reserve Bank of India and an additional tax deduction on Rs 50,000 on the interest component of home loans but the realty sector still awaits a revival of its fortunes. [related-post] Even though expectations were high, the industry has only witnessed the situation worsening with time. Unsold inventory has gone up amid weak demand and few project launches across the country. It’s not just the developers who are under stress. Brokers and customers, too, are facing the heat. A Noida-based realty broker narrated a similar story: “I was able to close 2-3 deals in a month till 2012, but now even one deal a month is tough. It’s a tough market. A lot of my friends have stopped dealing in real estate now,” he said. While the private sector has been hit on various accounts, sectoral experts feel that the housing sector has received less importance by the new government and that is visible in planned Central spending, which has witnessed a decline in the revised Budget Estimates for housing for 2014-15 and even in the Budget allocation for 2015-16. As against the Budget allocation of Rs 5,917 crore for housing in 2014-15, the revised estimates show that the amount spent was only 56 per cent of the initial allocation at Rs 3,327 crore as there were significant cuts in schemes like Rajiv Rinn Yojana (RRY) and Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The interesting point to note is that the Budget allocation for housing for 2015-16 is less than a quarter of the initial allocation for the previous year and stands at only Rs 1,448 crore. It is less than half of the revised estimates for 2014-15. “Everything seems to have stopped. While the previous housing schemes have been stopped, new schemes have not come up yet. The government spending on housing has gone down significantly,” said a former secretary of the Ministry of Housing and Urban Poverty Alleviation. Though the government plans ‘Housing for All’ by 2022, experts say it’s high time that the Centre puts its strong foot forward to achieve that. “After having announced the scheme during the first Budget in June 2014, the government has remained silent on details. The task of constructing 2.34 million homes every year as against an actual delivery of 1.2 million homes during the 11th five-year plan period (ending March 2012) is humungous. As of now, matters definitely do not look upbeat on this front,” said Anuj Puri, chairman and country head at JLL India. The last year also seems to have missed out on the Real Estate (Regulation and Development) Bill. While the regulations were framed when the Congress-led UPA was in power, the current government later decided to review the provisions of the Bill and even as it has approved some amendments, the Bill awaits clearance. The government also failed to make any significant progress on the Land Acquisition, Rehabilitation and Resettlement Act. Even though the Bill is critical to the government’s vision of building better infrastructure, affordable housing projects and smart cities, it now awaits recommendations of the joint committee of Parliament that is expected in the forthcoming monsoon session. In the meantime, project launches by real estate developers are also on a decline and the unsold inventory is on a rise. According to a report of PropEquity, unsold inventory across 14 leading cities across the country stands at 7.6 lakh units. The inventory pile up has been led primarily by Mumbai Metropolitan Region and the National Capital Region (NCR) with 2.15 lakh and 1.88 lakh unsold units, respectively, as of December 2014. Experts say that the housing demand is dependent upon various factors including growth of the economy, rise in job creation and investment by the private sector. Even as the GDP growth is expected to cross 7 per cent mark in 2014-15, the economic activity has lagged significantly. While corporate investments are yet to take-off, both corporate earning and the gross bank credit for the year 2014-15 stood weak. RBI data shows that the gross bank credit for the year ended March 2015 stood at a low of 8.6 per cent down from 14 per cent and 14.1 per cent in the year ended March 2014 and March 2013, respectively. A weak credit growth and subdued corporate investment have bearing on the new job creation, which, in turn, leads to a pick up in the real estate demand. Along with the residential segment, the retail space and office space market is also struggling. While there has been some take-off in the office space market in Bangalore on account of demand from the IT sector, other major markets have been weak. On the retail front, experts say that the e-commerce players have impacted the brick-and-mortar retailers in a big way. “E-commerce has taken the Indian retail market by storm, and has been growing at close to 35 per cent y-o-y in the last few years. Stiff competition among e-commerce players has resulted in price wars that had impacted the margins of physical retailers. There is a need to regulate the online retail space and bring them on level playing field along with physical retailers,” said Puri. Real estate stakeholders are now pinning their hopes on the government’s flagship Smart City project and are hopeful that the Centre will soon kick-start spending on the same which may lift the overall economic activity and thereby the sector.
