RERA+GST To Disrupt Housing Sector In Short Term: Report
The domestic residential market will take time to pick up due to twin impact from the Real Estate Regulatory Authority (RERA) and the Goods and Services Tax (GST), both of which are expected to disrupt the market in the short-term says the latest report by KPMG-Magicbricks titled “Residential Real Estate: An Investible Asset”. The report was released on June 29. “Though the residential real estate market remained subdued towards the end of 2016 due to demonetisation, it may take the time to pick up as RERA and GST are likely to disrupt the real estate market in the short term,” it said.
However, the report pointed that the Indian real estate market has been able to generate strong returns on investments to home-buyers on a long-term horizon and this trend will continue because of positive steps including reduction in interest rates, interest subsidy to home buyers, increased mortgage penetration and ease of FDI norms in the real estate and construction sector.
The report pointed that the housing prices in India more than doubled since 2007 and residential properties continue to hold strong potential for investment with rates still affordable across cities except for Delhi and Mumbai. It said that the prices remained muted in last three years with the modest growth of 4 per cent due to demand slowdown and huge delays in project completion. However, the report expects the market to be on the revival path in next few quarters. India's real estate and construction sector in expected to become the third-largest globally by 2030, doubling its share to over 15 per cent in the GDP, it said. "Indian property prices have more than doubled since 2007 (without adjusting for inflation) -- the second best globally," it said.
“India was ranked among the best-performing markets globally, thanks to the fact that real estate property prices have more than doubled over the last decade. Interesting to note is the affordability rate to own properties has come down by 50 per cent, as income growth has lagged property price growth. That being said, India’s property market is relatively affordable as compared to its global counterparts,” the report stated. Commenting on the report, Sudhir Pai, CEO, Magicbricks, said: “The urban population of India is anticipated to grow by nearly 36 per cent to over 580 million by 2030. This along with GDP growth, job creation and mortgage growth is expected to lead to a substantial increase in demand for housing in India.”
Commenting on the real estate industry’s performance and the way forward, Neeraj Bansal, Partner and Head, ASEAN Corridor, and Building, Construction and Real Estate Sector, KPMG in India said: “India holds a strong potential for residential property market growth, which is likely to witness considerable price appreciation over the next decade, with property market fundamental drivers, such as GDP, rapid urbanisation, shrinking household size, higher share of working-age population, and mortgage growth expected to grow at a higher pace in India.”
