The festive season, traditionally the time for the fence-sitters to make their home purchases, has arrived, and real estate developers, marred by severe financial crunch and muted buyer sentiment, are pinning their hopes on it to turn their fortunes.
While special freebies and offers are a normal during this time of the year, the boost by the government to push housing demand has added fuel to the fire on the role of this festive season in improving sales.
Here’s how this festive season can prove to be different and effective from the previous ones:
The real estate sector, being the second largest job creator after agriculture, plays a major role in economic growth. Given its linkages with other industries, the current sluggish scenario in housing segment has emerged as a major concern not only for builders, home buyers or its suppliers but also for the government.
Thus, the government, in the past few months, has brought in various measures to boost housing sales:
a) Stressed fund: The government has announced a special window to provide last mile financing, through a Rs 20,000-crore fund, for affordable and middle-income housing projects, which, according to its own estimates, will benefit around 3.5 lakh housing units.
b) Sops for government employees: In some good news for Central government employees during the festive season, the government has reduced the interest rate on house building advance (HBA) for all central government employees to 7.9 per cent from October 1, 2019 for a period of one year.
c) Ease of raising fund via ECB: The government has eased the norms for raising funds through External Commercial Borrowing (ECB) to facilitate financing home buyers who are eligible under the Pradhan Mantri Awas Yojana (PMAY), which will help in relaxing the liquidity stress.
The RBI Push: During the last festive season, the repo rate, or the rate at which the Reserve Bank of India (RBI) lends money to banks, stood at 6.50 per cent. However, after five consecutive rate cut by the apex bank, the rates have gone down to 5.15 per cent, resulting in banks offering home loans at rates as low as 8.20 per cent.
Right Flat Sizes On Offer: One of the biggest reasons for slow housing sales across India was the mismatch between the demand and supply in terms of size of homes. But, with the government focus on affordable housing to achieve the ‘Housing for All by 2022’ initiative, many builders has started launching optimal-sized homes, at good price points, which might help in attracting the buyers.
Realistic Festive Offers: Like every year, real estate developers have started queuing up with deals and festive offers. However, unlike over-the-top and unrealistic festive offers in the past, builders are coming up with much realistic offers this year, mainly because of the liquidity crunch they are reeling under.
Buyers’ Market: The housing market is reeling under slow sales and rising inventory for many years now, which has led to the home prices being stagnant in real terms. Stagnant prices, compounded with deep discounts and freebies, have made it a buyers' market, ready to be explored by the potential fence sitters.
Situation in the real estate sector is unlikely to see a turnaround overnight and the buyer confidence that was marred by project delays, non-deliveries and litigations, will only come back once they see the implementation of policy reforms spearheaded by the government. However, with due attention by the government, ably supported by the ongoing festive demand, the recovery process can get a kick-start this year.
The author is the executive director – residential sales at Knight Frank India