3 Jun, 2014

Modi’s plans for the real estate market

The new government promises to aggressively promote affordable housing, property to become the most popular investment option and for there to be a significant appreciation in real estate prices.

 With the Narendra Modi-led NDA government taking charge, the common man of India may soon turn the dream to own a house into a reality. In the past, issues such as affordability, delayed construction projects and litigations surrounding real estate have impacted developers as well as consumers.

modi plan on real estate

The new government has promised to change this scenario by pledging to aggressively promote affordable housing. Property is to once again become the most popular investment option and there will be a significant appreciation in the real estate prices. This will help meet the high demands project for the years ahead. Buyers with existing investments in this sector will be relieved, as the easing of regulations would enable the developers to speed up the construction processes.

The new government has been welcomed by the big names of the Indian industry with the hope that it will bring the economy back on track and raise the currently plummeting GDP to 8-9% in the coming fiscal year. The new government in the center is expected to remove the major bottlenecks that have been deterring growth.

Revitalised funding flow:

 Having won by a majority, the present government will enjoy unwavering stability at the center; this in turn shall encourage investor’s sentiments with regards to the real estate market. The country’s FDI in the real estate sector is expected to get a lift and global investors are now markedly optimistic about the Indian Economy.  It is expected that the economy will witness more than a 100% increase in foreign investment inflows, both in FDIs and FIIS, to above $60 billion in the current financial year.

The existing restrictions are due to be revoked by the urban development ministry, allowing foreign investment up to 49% free of all conditions. Foreign investment for urban renewal and slum redevelopment projects is also expected to see major relaxations.

Fast-tracked infrastructure:

 Development of many new cities is expected across the belt of the large infrastructure project like the DMIC (Delhi Mumbai Industrial Corridor) and the DFC (Dedicated Freight Corridor). The construction of these large infrastructure projects is to be expedited. These huge on-going infrastructure projects will lead to a big demand for warehouses, giving a boost to the warehousing and logistics-related real estate.

Developer’s hopes:

 India’s developers are hoping that:

The new government will expedite the process of granting regulatory approvals. The long-lasting lags in this regard have been a major obstacle for most of their projects.

The long lingering Real Estate Development Regulation & Development bill will be passed.

Land acquisition parameters will be eased so that availability of land is no longer a major constraint. Difficulties in acquiring land due to current policies has led to very escalated real estate costs.

Unstable government at the center, high inflation, and high interest rates on home loans has contributed to the rise in prospective buyers abstaining from investing in property.

Now, with the stock market rocketing and the Indian rupee appreciating, the buyer’s trends are expected to change rapidly. Increased sales, along with availability of funds from both domestic and foreign investors, will bring a significant breather to developers and finally bring an end of the liquidity crunch that has been faced.

The hope mantra:

 The 3 chief promises made by the NDA in their manifesto for the real estate sector are:

  • The development of 100 new cities
  • Putting a new land use policy in place
  • Planning for low-cost housing

Modi’s promise to implement an affordable housing policy presents a $150 billion business opportunity to the real estate sector. Consumers are optimistic about the impact that the new government will have on the real estate pricing and expect a reduction in home loans. The realization of these promises will mend and change the fractured spirit of the real estate sector and usher in a new era of business.

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