Developments that Affected Pricing in Real Estate Market
Nov 17, 2017 Home Trading Steps
Since November 2016, the Indian real estate sector has experience lot of developments that include demonetisation, the advent of real estate law and then the much talked about Goods and Services Tax (GST). And these reforms impacted the pricing of properties in a huge way. But how these factors did actually impacted the price. Let’s understand:
Demonetisation: one of the reforms that left a huge impact on property price had been demonetisation. It affected hugely the secondary sales market because of the disruption of circulation of the money in the cash form. A lot of other sectors or businesses also felt the impact of demonetisation which further impacted the real estate sector as well.
Real Estate Regulatory Act: the act is a revolutionary step that changed the scenario of Indian real estate sector to a certain extent. It's provision of maintaining an escrow account by the builders which implies that the developers had deposited 70 percent of the funds received from the customers to a separate account. This would tend to increase the compliance cost for developers. Hence the developers would pass on this increased cost to the home buyers which in turn would make the properties much more costly.
GST: 2017 Budget and the implementation of GST created a lot of restriction in the housing sector. With GST on the roll, the real estate pricing has also impacted such as in under construction properties 12 percent standard tax have been levied. Hence, the price of the under-construction price has increased to a certain extent which has caused a bit of trouble for the home buyers.
Credibility: in fact prior to all these reforms and regulations, the main factor that hugely impacted the real estate market, had been the credibility of the developer. Untimely delivery of the projects, low construction quality, disorganised behaviour majorly impacted the trust factor of the buyers. Hence this aspect has also been one of the reasons to impact the property prices. As per the experts, profitability has been always low due to the uncertainty factor. The high pricing and unaffordability could be another reason.
Therefore market expert suggest that the Government need to intervene in much more way such as rather than only penalising the developers for delayed delivery and other aspects reforms such as escrow accounts, tax bonds and closely working with housing associations should be encouraged along with more focus on pushing the initiatives like Housing for all in a huge way.
Demonetisation: one of the reforms that left a huge impact on property price had been demonetisation. It affected hugely the secondary sales market because of the disruption of circulation of the money in the cash form. A lot of other sectors or businesses also felt the impact of demonetisation which further impacted the real estate sector as well.
Real Estate Regulatory Act: the act is a revolutionary step that changed the scenario of Indian real estate sector to a certain extent. It's provision of maintaining an escrow account by the builders which implies that the developers had deposited 70 percent of the funds received from the customers to a separate account. This would tend to increase the compliance cost for developers. Hence the developers would pass on this increased cost to the home buyers which in turn would make the properties much more costly.
GST: 2017 Budget and the implementation of GST created a lot of restriction in the housing sector. With GST on the roll, the real estate pricing has also impacted such as in under construction properties 12 percent standard tax have been levied. Hence, the price of the under-construction price has increased to a certain extent which has caused a bit of trouble for the home buyers.
Credibility: in fact prior to all these reforms and regulations, the main factor that hugely impacted the real estate market, had been the credibility of the developer. Untimely delivery of the projects, low construction quality, disorganised behaviour majorly impacted the trust factor of the buyers. Hence this aspect has also been one of the reasons to impact the property prices. As per the experts, profitability has been always low due to the uncertainty factor. The high pricing and unaffordability could be another reason.
Therefore market expert suggest that the Government need to intervene in much more way such as rather than only penalising the developers for delayed delivery and other aspects reforms such as escrow accounts, tax bonds and closely working with housing associations should be encouraged along with more focus on pushing the initiatives like Housing for all in a huge way.
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