Only serious developers can now function in the sector
Vineet Relia, MD of SARE Homes, says that the sector is anticipating positive announcements in the Budget for the real estate sector, which would help the market turn around in the next couple of months.
Excerpts from the interview:
HOW IS THE REAL ESTATE MARKET DOING IN THE RESIDENTIAL SEGMENT?
>> It is a time of great flux for the real estate sector. The Real Estate (Regulation and Development) Act, 2016, and the demonetization drive, together, have jolted the culture of “chalta hai“ (anything goes) in the country. Now, the sector will no longer be a walk-in for casual business where any person could style himself as a developer and pluck the low hanging fruit on offer--which has been the case so far.
Until now, just anybody who made money in some business entered the real estate sector without appreciating that it is a serious and specialized business. Worse, these people assumed the sector offers easy money to all and, many actually made a killing--but at the cost of customers.
These casual players have caused serious damage to the sector, especially to the reputation of serious players.Because of their delay in handing over possessions and poor quality of product and business ethics, buyers have lost confidence in the whole community of developers.
WHAT HAS BEEN THE EFFECT OF DEMONETIZATION?
>>The demonetization drive is good for the real estate sector, as it will bring transparency and efficiency to the sector, which will help it in the long run.
But, somehow, the whole process itself gave out a wrong perception to people that prices would fall.
The sector is reeling under an unprecedented slowdown for last three years and prices have already hit rock bottom.In fact, if you were to take the timeline correction and adjust for inflation, prices today are much lower than what they were three-four years ago.So, any chance of prices falling further is non-existent.
The good thing is that, from now on, the market will be driven by end users, which is good for its health in the long run.
Hitherto, short-term investors ruled the roost by remaining invested during the construction period of a project and exiting before completion, taking the profit in cash to avoid short-term capital gains tax.
Now, with cash payments reduced significantly, such investors will not find it attractive to invest in a project at the time of launch to book profit before the completion of the project.