Reduction of GST will incentivize the sales of under construction properties.

Samujjwal Ghosh, Director, Xanadu Realty

What are the key continuing challenges which you foresee impacting the real estate sector?

To understand the impact on real estate, it is important to know the state of this sector Pre-Covid. In the last 4-5 years, new inventories have been growing faster than sales velocity while prices have remained flat. Finance costs have been increasing but the credit flow was hit by the NBFC crisis. According to research data, the growth in sales was 20-25% at an all-India level but the growth in inventory from 2014 till now was around 2.5 times. Real estate was already a candle in the wind before the pandemic struck.

The key challenges facing the sector now are acceleration of sales, retention of labour and cost control and construction execution capability.

Are there any green shoots visible after the announcement of the stimulus packages / and RBI's rate cuts on the realty sector?

In addition, extending project registration and completion timelines, reduction in home loan rates, slashing of stamp duty, reduction in TDS on sale of property etc. have provided a much needed boost to the ecosystem. There are signs of a few green shoots with demand of affordable housing seeing an uptick, but developers will refrain from new launches for at least 6-8 more months. September-October sales are encouraging. As customers regain confidence on their personal financial outlook, the pent up demand of the last couple of quarters will result in growth of the sector in Q4.

What further measures do you expect from the government?

The government can extend the exemptions given to affordable housing to mass and mid-segment housing too. Tax benefits extended beyond affordable housing will help generate demand and reduce the inventory overhang in key cities.

The government can also look to re-evaluate the goods and services tax (GST) on under construction properties. Reduction of GST will incentivize the sales of under construction properties. This will unlock a lot of unsold inventory and also help the developer to complete the construction.

The reduction in stamp duty, valid till December 2020, has resulted in a slight increase in sales velocity. The industry and the consumers will be benefited if this reduction is extended for another 6 months. Lastly, low cost financing options for developers and consumers will act as the shot of adrenaline required for this sector.

Brief us on you outlook for the next couple years in the realty segment.

The road to recovery is going to be long and arduous. We will see a lot of consolidation and a new breed of players will emerge. Business models will be re-evaluated and only the smartest may come out unscathed. Institutional customized solutions will drive the recovery. New categories of products will be introduced and the consumer will evolve.

While the prices will remain flat over the 12-24 months, we anticipate the sales velocity will recover back to the pre-Covid era. Real estate developers will need to invest heavily in creating consumer centric brands to help them differentiate their product.

New trends will emerge in architecture and design. Optimising indoor space utilization through fluid designing principles in structural framework and interior fit-outs will allow easy transformation of space for multiple needs and functions.   Co-living and student housing - the buzz words in the sector prior to the pandemic will have to repurpose their offering as recovery of the shared economy will take longer. Flexible workspaces and Co-working sector will face headwinds over the next 12 months. Real estate is not new to crisis. This one too, shall pass.

Hits: 11