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The world's largest democracy is gearing up for its biggest electoral exercise yet. This election will see more than 81 Crore people of the 120 crore populace in the country participating. After ruling over the centre for the better part of the new millennium, the present government is facing a strong anti-incumbency wave from several quarters. Among the several sectors expecting to witness a change in fortunes is the humble real estate sector.
Understanding the problems hounding the sector
The property sector of the country was one of the worst-hit segments due to the global economic meltdown. The ramifications for the sector have been too much to bear and the developers and investors alike are hoping to see some light at the end of the tunnel. The economic crisis has created several problems for the sector, majorly issues related to the rise in prices across related sectors like services, cement, steel etc. This has in turn raised the construction costs of the projects. Due to the stagnation in the income levels, the developers have found it difficult to market the units to the end-users, in essence creating a catch-22 situation.
Realtors across the country are also blaming the red-tape surrounding the project approvals. Due to the delay in starting the construction, the project costs have surpassed the estimated project cost and are now peaking at unprecedented levels. Subsequently, there was a dip in demand. Unless there are strong indications of economic revival post-elections, the sector will remain in a state of distress.
The role of legislation in the real estate sector
In order to address some of the issues nagging the property sector, the UPA Government introduced two key real estate legislations- The Real estate regulation bill and the amended land acquisition bill. Both these sought to address the most pressing issues of the sector including transparency by way of a sector ombudsman. These bills also attempted to address some of the end-user related contentions by proposing to standardize the definitions used in the sector like 'apartment', 'common area' etc.
With the increase in the clamour against money-laundering, the real estate bill seeks to introduce a mechanism through which real estate agents or brokers are covered under one umbrella and are answerable to an authority appointed by the government. The above mentioned points provide a skeletal outline of the current policy framework. However, the stakeholders of the sectors would like to see more.
What the developers are hoping for?
The delay in approvals would be at the top of the priority list for most realtors. They want a clear mandate that ensures a smooth flow of things starting from the top of the order. For this to happen, political stability at the centre is imperative. The lack of political consensus over the past decade has led to a policy paralysis and which in effect has stalled the growth of one of the most important sectors in the country. Although the Indian economy managed to stay afloat during the worst times of the crisis, it was mainly due to the inherently strong fundamentals of the sector rather than a vibrant change in policy making.
What the investors are hoping for?
From an investor or buyer point of view, the rise in the price levels is the most important issue. These have derailed the plans of many an investor and has in turn offset the demand-supply ratio. There have been exceptions to this rule; unfortunately they are few and far between.
Despite the criticism, it is commendable that the policy makers are beginning to appreciate the concerns of the sector and are willing to go the extra mile to make a change. This should be supplemented by a strong government at the centre, which will not compromise on tough decisions.
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