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Real Estate: Revamping The Business Model

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Real Estate: Revamping the business model

Real Estate has always been the top choice to create an investment. This investment was always advised to be early as possible, with a guaranteed return. But recently it has gone down a slow path as potential buyers and investors are opting to wait for a better opportunity. Real estate in India has undergone a big change, beginning with Demonetization which effectively pointed it away from cash transactions. “Demonetization coupled with the imminent implementation of RERA and GST resulted in a major slow-down in terms of real estate sales. It was a domino effect – by the time RERA was in place, it was time for GST to be implemented, so till July this year, things were very slow, across segments of Indian real estate,” explains real estate Czar Dr Niranjan Hiranandani.

Last year the number of units sold were lesser than the new residential projects. Most of the states have fallen in line at the initiation of the implementation of the Real Estate Regulation & Development Act (RERA). This landmark law had enforced the transparency and accountability requirements for developers into the system.

The Goods and Services Tax (GST) also had a major impact on how many developers run their businesses. Demonetisation have affected the older ways of working, but did not affect self-governing developers with the right products targeted at the working masses. The rest have realised it is time now to revamp their existing business models if they want to remain in business at all.

India is finally finding its affordable housing scheme in action. One crore houses are to be built in rural India by 2019, and this vital segment will now see cheaper sources of finance – including external commercial borrowings. Re-financing by National Housing Banks can give a further boost to the sector. 

The parameters for affordable housing were also revised on carpet area rather than saleable area in the four main metros and non-metros respectively. This effectively boosts the affordable housing sector across India. Moreover, the demonetization of high-value currency notes will cause land prices to ease in the next few years – especially in far-flung areas around Indian metros and the Tier-II and Tier-III cities.

The rise in wealth influx in the real estate market pertains also to the rise in jobs. The employment sector is set to increase by more than 80% by 2025 as the potential opportunities in the sector are expected at 17.2 million jobs by 2025 up from 9.2 million in 2016, showed a CREDAI-CBRE joint report. All the industries dependent on each other will see a boost Large scale projects will boost construction and inter-dependant allied industries. It will open up new micro markets and peripheral locations of metro cities. As infrastructure is essential for growth of realty market.

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2018: A Horizon Full Of Opportunities

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2018: A Horizon Full Of Opportunities

Taking up a roller coaster ride, the Indian real estate sector has gone through some big changes in 2017. Be it a regulatory reform like RERA or an introduction of a new taxation system, GST, the market has seen various trends during this phase. As on one hand these changes brought the market to a standstill, they also brought the long awaited transparency and accountability on the other hand. RERA has brought the developers in line and made sure that the deliveries are on time and transactions are totally transparent. Protecting the buyer’s interests, this will be an essential factor for a higher growth in coming future.

This effect has resulted into a large number of unsold units, bringing down the prices. This excess supply of units has brought the buyers, a luxury of choosing the properties of their choice at their budgeted prices. It is believed that now this phase of the real estate market is ruled by the buyers and will continue to do so for some time.

New home launches across various cities of India have dropped to a significant level in the third quarter of the current fiscal. Nearly the third of a calendar year shows a drop of 40 percent in the overall number of project launches.  This graph predicts that the demands will slowly gain momentum and the prices will start picking up.  As builders have begun to focus on finishing their current projects as soon as possible.

The excess liquidity in the banking system have led the RBI to lower down the key lending rates. The home loan interest rates went down from 9.5 percent a year to 8.3-8.4 percent. That invites for a considerable savings in the EMI costs; enabling the consumers to take advantage of low-cost home finance, and buy a house of their own. In 2018 it is expected to continue on the same path.

After the revision of the carpet area for the Middle Income Group (MIG) category under the Pradhan Mantri Awas Yojna (PMAY) scheme, the affordable housing sector might see a jump in sales. Carpet area saw an increment from 90 sq m to 120 sq m in MIG-1 and 110 sq m to 150 sq m for MIG-2. Giving the middle income home buyers a bigger and better houses. Taking the cue, the developers are now catering to this special segment in order to clear out the stock of unsold units.

Following the trends, there is a prediction about merging of the real estate sector in 2018. The toughened RERA laws will push the non-complying companies into a merger with the bigger players. Eliminating the delay and other setbacks, the consumers will be more protected, hence elevating the level of confidence. The Foreign Direct Investment (FDI) will be boosted further, making Indian real estate a global market. The smart city initiative by the government will also enhance the social and the economic infrastructure of the many upcoming cities.

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2017: A Significant Year In Real Estate

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2017: A Significant Year In Real Estate

The year 2017 has been very influential in witnessing a ground breaking transformation as many major events impacted the real estate sector. Looking back at the eventful period and its influence on the market.

With untapped potential and an unlimited possibility of investment, the real estate sector has always been the foremost choice among the masses. Fast investments always provided with a guaranteed return. In the year of 2017, real estate sector saw some of the most challenging reforms ever introduced. The monetary flow took onto a slumping rate as the potential buyers and investors opted to wait for a better opportunity.

Real estate in India went under a big transformation, beginning with Demonetization in 2016, taking away the cash out of the transactions. It changed the way, developers use to work earlier. The affordable housing segment got benefited as compared to the luxury housing segment because it consisted of the consumers, who were dependent on home loans for transaction. Dropping of interest rates further added to the growth of affordable housing. After the introduction of Benami Properties Act, later in the year we saw the entry of RERA, reducing the number of selling units lesser than the last year.

The real estate sector stumbled upon the initiation of the implementation of the Real Estate Regulation & Development Act (RERA). On the brighter side, this landmark law brought the much awaited transparency and accountability in the sector, hence making the developers fall in line.

Then came the implementation of Goods and Services Tax (GST), which resulted in a major slow-down in terms of real estate sales. Only applicable to under-construction projects and hence making ready-to-move-in apartments exempting from the GST. But the extra cost on these projects will be charged to home buyers on the sale price, while the developers can avail this credit only on the cost of construction. Paying the GST on the full project, the input availed is only on the construction cost so there may be a gap of nearly 30 per cent. Therefore, developers aimed for hiking the prices to fill in that gap.

“Government introduced policies like RERA, amendments to the Benami Properties Transactions Act and GST are changing the very face of the realty sector. The real estate has seen failure till now, but these regulations have been crucial in bringing more transparency in the sector and confidence among the buyers”, says Atul Banshal, President- Finance and Accounts, M3M.

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Realty Nxt Interviews, Mr. Dhaval Ajmera, Director Ajmera Realty At CREDAI MCHI

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Realty Nxt Interviews, Mr. Dhaval Ajmera, Director Ajmera Realty at CREDAI MCHI

RealtyNXT brings you an exclusive interview with Mr. Dhaval Ajmera, Director Ajmera Realty and Infra India Ltd, at the CREDAI-MCHI Maha Property EXPO 2017. He reveals the reason behind the success of Ajmera Group and how it has surpassed the competition. Owing foremost to their legacy of five decades, providing projects more than 20 million sq. ft. among the metro cities across the nation. He gives credits to experience and the deliveries they have been making, the prime factors in leading them to a desired domain in real estate sector.

Talking on the recent initiatives like Demonetization, RERA and GST, taken by the government for the real estate sector, he sheds light on their deep effects on the real estate after this sector took a hit. He acknowledges the consumer’s awareness regarding the low dipping of the market. But also advices the customers to invest now, as the present market is about to rise. He expresses high hopes for RERA because it has brought the long awaited transparency in the real estate. Helping the buyers to take a confined decision after a full research on the project. On the other hand, he claims that the market will take some time to get over the effect of GST as it has provided a setback for the projects mostly above Rs 10,000-20,000 per sq. ft.

Talking on the CREDAI-MCHI EXPO 2017, he praises the franchise for bringing in the biggest crowd real estate sector has seen, around 20,000-30,000 consumers attended this year’s Expo. According to him, it turned out to be a great platform to showcase one’s projects to the market. After the RERA and GST, the buyers are getting more informed about the market and hence the expo has provided them an interface to get access to serious business.

Inspiring to become one of the top developers in India, Ajmera Group is currently diversifying by spreading its projects in various cities of India. Expanding and diversifying are the two prime initiatives that Ajmera Group is looking forward to, in the next year.

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