The current data from the project-tracking database of the CMIE or Centre for Monitoring Indian Economy shows that the Real Estate industry of India is still wobbling due to the unpleasant influence caused by demonetization, the introduction of RERA and GST.
As suggested by the data, the June quarter of the year recorded the lowest launches of new Real Estate projects since 2005 accounting for a 60% and 29% decrease in comparison to the period a year ago and the last quarter, respectively.
When looked at the cost of the projects, the worth of the new launches in the Financial Year 2017-18 has turned out to be lesser than that by 23% and 5% in 2016-17 and 2015-16, respectively.
Among the newly launched projects in the June quarter that have their data available, the largest project in terms of value is the Farrukhnagar Industrial Park worth 600 crore rupees.
More than 2.5 trillion rupees are stuck in the stalled realty projects. In spite of a marginal decline in the quarter that ended in June, the stalling rate on an average remains at 13% in the 1st half of this year. The Commercial Real Estate with a 20% stalling rate exceeds that of the housing sector standing at 11%.
RERA or the Real Estate (Regulation and Development) Act has been held responsible for a major part of the industry slowdown in 2017-18.
As stated by an expert in a report of June 12, the developers decide to keep off new launches so as to ascertain the influence of RERA on their unconfirmed and ongoing projects as well as the measures they need to take to comply with the new regulations.
As evident from the bank lending data, realty related borrowing from backs has not improved significantly. Moreover, the growth of credit to the commercial segment has been falling consistently since 2014 and is at low levels.
It is not all surprising for the market prices to fall or remain the same even in cities where the realty market was mostly driven by investment demand. As shown by the NHB (National Housing Bank) Residex, the most affected markets are those in the suburbs of Delhi-NCR region and Mumbai.
The correction in prices could not make much of an impact since the home sales haven’t improved till now as stated by a renowned property consultant’s report of July 25, 2018.
It is likely of the policy rates to get a hike in the upcoming months thereby, increasing the borrowing costs. This will result in the dampening of Real Estate Investments.
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