How real estate policies will impact your purchaseIn recent years, the real estate industry has been struck by repeated body blows – demonetisation in November 2016, the rollout of Goods and Services Tax (GST) in July 2017, and the continuing Covid-19 pandemic. Yet it has held its own. A Knight Frank-FICCI survey showed that real estate sentiment was at an all time high in October-December 2020; another survey by Anarock found that housing sales surged 29 per cent in seven leading cities of India in Jan-March 2021. Luxury housing saw particularly rapid growth.
Karnataka’s real estate developers, like their counterparts elsewhere, have reason to be pleased, but how do they see the future? Are there policy gaps still impeding their growth? To address this and other related questions, Namma Permanent Address, a joint initiative of the Confederation of Real Estate Developers Association of India (CREDAI), Bengaluru, and The Times of India, organised a webinar on ‘How Real Estate Policies Will Impact Your Purchase’, moderated by Suchetana Ray, Senior Assistant Editor of ET.
The participants agreed that with the Real Estate Regulation Act (RERA) passed in 2016, which considerably increased the industry’s accountability and regulatory burden, the processes of consolidation and corporatisation would accelerate in coming years. “Consolidation has already begun with the number of developers in Karnataka reducing,” said Bhaskar T. Nagendrappa, President Elect – CREDAI Bengaluru, and Joint Managing Director, Habitat Ventures. “ The industry is becoming more organised while buyers are also growing more knowledgeable.”
Use of technology would also rise, with the pandemic having already given it a big fillip. “ Customer visits to sites have sharply reduced, being replaced by online audio visual presentations, and taking customers on virtual visits. More and more bookings are also being done online.” said Amar Mysore, Member, CREDAI Bengaluru, and Executive Director, Brigade Enterprises.
“The separation between companies which provide the capital, and those which carry out the construction, is also likely to increase, as has happened in the West,” said Venkatesh Panchapagesan, Chairperson, Real Estate Research Initiative, IIM Bangalore, and Associate Professor, Finance and Accounting, as also Chairperson of IIM Bangalore’s incubation centre, NSRCEL. “Companies with the lowest cost of capital will thrive,” he added.
But all the participants felt that the government was doing little to support the industry. They were especially peeved with the state government defining ‘affordable housing’ more narrowly than the Centre, with a recent decision allowing reduction of stamp duty from 5 per cent to 3 per cent only on houses that cost less than Rs 45 lakh. “Why was it not done across the board as in Maharashtra, where a similar reduction has led to tremendous improvement of the market,” said A. Balakrishna Hegde, Managing Director, Chartered Housing, also Advisor CREDAI Karnataka and Executive Council Member, CREDAI National. “There are far too few houses within that category, especially in Bengaluru. They would comprise barely 20 per cent of a builder’s stock,” he added. Bureaucratic red tape is another challenge. “There are still 42 tables that have to be approached for various sanctions before starting a construction project,” said Hegde of Chartered Housing. Nagendrappa of Habibat Ventures agreed. “There is much talk of ‘Ease of Doing Business’ but that does not mean simply introducing new processes or software and the attitude towards developers should also change,” he said.
They agreed that the attitude stemmed from a deep-seated distrust of developers, which arose because of past actions of some unscrupulous operators. “Distrust is the bane of the real estate sector,” said Panchapagesan of IIM Bangalore. “But the situation has changed with RERA coming in and the increased professionalism of the industry. CREDAI should make this a branding issue, pointing out that its members adhere to standards.”
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On sustainability and green housing, too, there was unhappiness. “The government has to take the lead, setting guidelines and standards, but developers too must follow the rules, they should not abuse the system,” said Hegde of Chartered Housing. On green housing, the developers regretted that customers entirely focused on cost. “We need to effectively communicate to buyers how green homes, though slightly more costly, eventually mean large savings on power, water and more,” Hegde added. Panchapagesan felt that only government intervention, in the form of both subsidies for green housing and penalties for violating guidelines, could bring about a change of behaviour.
