Expectations of property buyers from new Govt

The General Elections 2014 is slated to be the biggest game changer for the Indian Real Estate sector. All hopes are pinned on the newly elected government and its policies and the sector is expecting the state of affairs to change for the better. In 2013, rising inflation, high interest rates, slow economy, huge inventory pile up and low sentiments of buyers was seen looming over the real estate sector in the country. However, this is expected to change once the new and stable government is formed at the Centre in about four days.

CommonFloor recently conducted a survey to understand the Indian property buyers’ expectations from the ongoing general elections and the impact of it on the real estate sector. We received an overwhelming response from the people who firmly believed that a stable government will give a major fillip to the realty sector as a whole.

Fig. 1

Fig. 1 clearly indicates that people expect, post poll results, sales and prices to rebound in the real estate sector as about 49 per cent people voted for it. About 33 per cent people think that post elections realty sector will become more organized and transparent in anticipation that the next government will push for several reforms in the sector that were introduced in the last one year. About 18 per cent people think that private equity investments will increase after elections as India will attract foreign institutional investment in realty sector due to reforms such as Real Estate Bill, relaxing FDI norms etc. and introduction of REIT.

Fig. 2

According to Fig. 2, Bangalore emerged a clear winner amongst the cities to attract major investment post elections. About 20 per cent respondents chose the ‘Silicon Valley’ as the preferable investment destination. This may be due to growth of satellite towns, continued IT/BT/ITeS related growth and migration from all parts of India. Interestingly, property prices in the city are also not as high as Mumbai and Delhi. Among other cities, Pune and Mumbai emerged the top favorite twin cities in Maharashtra with 16 per cent of respondents choosing each. Pune is closely competing with Mumbai. The property prices in the financial capital have become unaffordable for most people due to various reasons including paucity of land. On the other hand, Pune has recently emerged as one of the top affordable locations in the country. The city is also known as the IT hub of Maharashtra. Chennai emerged as fourth choice with 15 per cent participants opting for it. This is may be due to great industrial growth in the city due to automobile sector and the emerging IT growth. Hyderabad followed them closely with 14 per cent votes. Interestingly, Noida and Gurgaon were the two preferred investment destinations in NCR with 10 per cent and 9 per cent votes respectively.  Thus, accounting for a healthy 19 per cent votes for only two regions of NCR. Therefore overall NCR region can be said to be one of the leading destinations if seen as a whole including cities such as Ghaziabad, Bhiwadi and Faridabad etc.

Fig. 3

The survey further asked the readers about their preferred investment option post elections.  The question received an overwhelming and surprising response from the participants. Fig. 3 indicates almost 58 per cent people think that real estate would be the best investment bet after elections. This strengthens the view that worst is over for the real estate sector and the economy in the coming months and, post elections, political stability at the Centre will bring the much needed reforms in the sector as evident from various opinion polls. In the second position, people preferred the stock market with 24 per cent people opting for it in a post-election scenario, expecting industrial revival resulting in better GDP growth prospects in future. Surprisingly, gold will be losing its sheen in the coming future with only about 13 per cent people thinking that it will be a good investment option. However, it seems people are still not convinced about Mutual Fund as preferred investment option with only 5 per cent people opting for it.

Fig. 4

With a stable government at hindsight, we asked our readers about what steps should be taken by the next Government to curb black money in the real estate sector so as to encourage transparency. Our readers responded with great interest. About 33 per cent of the participants felt that bringing a single window clearance system for real estate projects would be a much sought-after reform as demanded by the industry since a long time. Surprisingly, 33 per cent of respondents also think that mandating UID in all property transactions and linking it with PAN card number would curb black money significantly by reducing chances of benami property transactions.  About 22 per cent participants think that constituting statutory regulator for real estate sector is essential for curbing unscrupulous practices by developers and builders. While about 11 per cent participants think that streamlining taxes in the sector would curb black money.

Conclusion

CommonFloor survey clearly indicates that the newly appointed government would lead to a more buoyant Indian real estate market, provided a stable government is elected. Buyers who have been anxiously waiting on the edge will enter the market and make their property purchase. In the short to medium term, if the newly elected government is able to bring down interest rates and curb inflation it will directly impact the realty sector in a positive way. Going forward, the trend would be for affordable and mid-income properties. Property prices may escalate north and buyers’ sentiments will improve drastically and the real estate industry, which is currently under the realm of a slowdown, may become active again.