It was the evening of November 8th. An evening where most people in India were just
about dusting off the stresses of the day. Kitchens bustled. Dinners were on the stove. Friends relaxed in pubs. Workaholics continued to type away on their keyboards in well-lit cubicles. Children grumpily finished their homework while grandmothers looked on indulgently. It was an evening just like any other until India’s Prime Minister, in one swift move, announced the spectre of demonetization. Panic set in. Cash burned. ATMs dried up, and economists tried to imagine the impact of the move. Theories were formulated. Arguments and debates followed. And one industry watched the developments closely. Closer than any other industry, perhaps.
The real estate industry hung back anxiously as rumours floated on the impact of demonetization on the sector. Sentiment was its lowest ebb. Would the industry recover? Would buying dry up? Would unsold inventory continue to pile up? Would homebuyers exercise further caution in their homebuying?
Lending Becomes Easier
Fast forward to May 2017 when India’s Real Estate Regulation Act (RERA) came into full effect. The country’s central bank, the Reserve Bank of India (RBI), kept its policy rate unchanged at 6.25%. But banks are providing easy liquidity in a cash-starved sector, reducing their lending rates even without RBI’s intervention. The State Bank of India reduced its interest rates by 25 basis points. Other banks such as HDFC, ICICI, Bank of Baroda, and the Oriental Bank of Commerce have also cut their home loan borrowing rates. With the power of RERA, discounts from builders, and easier lending, is this the best time to finally take the plunge and buy a home?
“I had been planning to buy a house in Bangalore for years now. And just when I decided to go for it, demonetization happened, and I became worried. I put off my plans just to gauge and see what happens. There were rumours that prices would fall in the sector post-November. I finally signed the papers on my little apartment in April this year. I got a great deal from my builder, and the EMI was fairly manageable. I am in the final stages of giving the finishing touches to my apartment, and I am so excited!” says Husna Syed, who is part of a growing number of single women in India who are adding the safety of real estate investment to their portfolio.
“Was this the right time to buy?”
”Absolutely. I had no doubts. I feel more confident with RERA now in force as well. There is more transparency, more confidence, and a sense of positivity overall.”
Positivity Creeps In
That sense of positivity is what is creating cheer in the real estate industry after a period of gloom. The homebuyer is standing to benefit the most from the changes over the past few months. The Indian economy is already the fastest-growing major economy, set to grow at a rate of 7.2% in 2017. The country’s large and expanding middle-class population is fueling consumption and the maturing finance industry is aiding this. Budget housing is already taking off. The Indian government’s flagship housing scheme, the ‘Pradhan Mantri Gramin Awas Yajna,’ was launched in December last year, just a month after demonetization and has the ambitious plan of providing a house for every Indian by 2022.
It’s not just growth in major cities. There has been renewed interest in Tier 2 and Tier 3 cities, even as metro cities continue to expand.
Ramesh Krishnan is currently developing a project in Chennai that is very close to his heart. “I had always wanted to develop houses that people can afford. I have come through life after a bit of hardship and I understand the value and pride that you get from having a home of your own. I have priced the homes in this project within reach of the average middle-class Indian. We are receiving great interest, and I am happy that more and more young people are investing in their dreams.”
New Areas to Buy
The upsurge in sentiment means that homebuyers are looking for value buys. In the South, Bangalore’s emerging areas of Sarjapur and Kanakapura Road are increasingly capturing attention. In Chennai, Oragadam, Perumbakkam, Alandur, and Medavakkam are showing promising growth. Mumbai, which has historically priced out middle-class investors, has some attractive projects in Ulwe, Kharghar, and Taloja. Areas such as Miyapur, Chandanagar, and Gachibowli are slowly coming into their own in Hyderabad. Even Punawale in Pune has something to offer of value for the homebuyer.
Realty Demands Reality
While the picture might appear rosy, it’s not always so. The effects and implications of RERA are yet to be fully realised. Home loans are always subject to fluctuations and economic growth might be hampered in case of a lacklustre job market. Yet, despite these worries, housing rates are at their lowest, interest rates remain attractive, and confidence is rising. Perhaps that is what finally convinced Arya and Rahul to go for a joint home loan on the house they had been eyeing for months in Guindy, Chennai. Some times are just right for dreams. Some dreams are just about to begin.
