Indian real estate is at a cusp. There has been a small 25 basis point cut in repo rates announced by the Reserve Bank of India. While it has not translated into a cut in home loan interest rates yet, it can be the first step to raising consumer sentiments and starting off the buying cycle in India. Consumers are active and searching. So what is the consumer waiting for?
The consumer is waiting for a clear indication that the Ache Din (good days) promised by the Modi Government are actually here. There are a few quick things the government must address if the consumer is to be brought to the negotiating table:
1) The consumer today waits for home loan interest rates to fall before starting to buy. In the past it has been observed, when rates go up old consumers have to pay more in accordance with the floating rates but many rate cuts or special rates are reserved for new home loan consumers. Any assurance that regardless of when he or she took the loan, the rate cuts will fairly be passed on to all consumers and not only to new consumers will instill confidence in them.
2) Real estate developers have by and large been building over the past two years. But if there are disputes of specifications, delivery dates, sizes, prices, add-on demands, escalation etc, there is still no easy means of resolution for the consumer. Battling the legal departments of large developers is daunting and the consumer sentiment is down on this count too. A quick implementation of a real estate regulator that has under its purview city departments that grant approvals to new projects, developers and consumers will be a step forward.
3) Today, a large number of people have more than one house. Even as they lease out the spare houses they do it with trepidation as rental laws are heavily biased in favor of tenants. In case of defaults, landlords have to knock the doors of tedious legal systems. Simpler rental laws will bring more confidence among landlords and help unlock the unoccupied urban properties.
4) Real estate policy has to be less selfish. As coffers run low, city governments raise property taxes and registration values. However, history shows that collections rise when taxation rates are low and consumers comply voluntarily. Government policies need to favor the real estate consumers to bring back the confidence. The launch of an affordable housing policy in Haryana for instance pushed up launches in this segment.
5) Government needs to address social housing to ensure that everybody has a livable house. That would truly be the test of the Smart Cities concept in India.
Here’s hoping that we will have many more issues to feature in our “Top 5 in Real Estate” series in the 66th year of the Indian Republic as well.