The last two years have changed the status quo for the real estate sector, with home sales being rather dismal. Inventory has been piling up and investors, though keen, have been following a wait-and-watch policy.
But it’s a good enough estimate that things will change this year, for the better. Let’s take a look at what the Indian home buyer can look forward to, in 2016:
Prospective home buyers will not stop at just inquiries: The last two financial years have seen a massive rise in the number of inquiries. This could have stemmed from stagnant prices, smaller unit sizes being available and reduced interest rates, thanks to RBI.
Realty companies also adopted innovative marketing practices, such as selling through popular e-commerce portals like Snapdeal.com & Amazon.in etc. For the potential home buyer, all these micro-economic factors have consolidated and will work favorably for them.
Hence, there could be a balance in the demand-supply situation, reducing inventories across the board in most cities. Home buyers will definitely rethink their stance on inquiries and take it to the next step.
Easy Payment Plans will make home buying an attractive option: Realtors and financial institutions are ensuring that advantages are in favor of buyers.
Several innovative schemes are coming into play right now:
- Customized payment plans: Buyers can modify payment schedules according to their convenience. While this may result in a marginal increase in the price of the project, it works out beneficially for the buyer.
- Schemes that work for buyers: The two popular versions right now are Construction Linked Plans (CLP) and Possession Linked Plans (PLP). These are offered in ratios such as 20:80, 30:40:30 and 5:85:10. The PLP 20:80 scheme is popular among home buyers, and many also opt for the 30:40:30 scheme for popular areas. For those who can get a good deal from banks – the 5:85:10 works ideally.
- Reduced Pricing: Many builders with a huge inventory on hand are offering options of purchasing a 3BHK at the price of 2BHK. This is a relatively new scheme, but perfectly suited to today’s buyer.
- Besides these, there are also discounts based on referrals and loyalty schemes. Cash back offers and the no-EMI scheme are also popular. Some buyers are even offering a fully furnished home as well as additional car park spaces. Such schemes are bound to go up during the festive seasons this year.
More affordable units: Over the last two years, builders have progressively moved towards aligning themselves with market requirements. This is why we are witnessing an increased supply in the mid-segment apartment range. These are primarily in the Rs 25- 40 lakhs price range and are available in Tier-I cities. Converting 2BHK homes into 1BHK models with basic amenities is also on the rise, ensuring there is balance of home spaces.
Real Estate (Regulation and Development) Bill (RERD Bill) 2013: For the last two years, the Government of India has been under immense pressure to pass the RERD Bill. The immediate benefit for potential home buyers if this bill is passed, would be the establishment of a real estate regulator, independent of the government.
A Real estate developer can register only if they deposit 70% of amount received for a project in a single bank account, and this amount has to be used for the purpose of that project only. This will act as a safeguard ensuring the project is completed on time and that the buyer’s money is not locked indefinitely.
Housing for All initiative: The Housing for All by 2022 is an initiative of the Prime Minister, Narendra Modi and is aimed at urban centers with the following agenda
- Slum rehabilitation with the help of realty developers
- Promotion of affordable housing options for the poor through a credit linked subsidy
- Creating affordable housing with the help of the Public and Private sectors
- Subsidies for individual house construction or enhancement if beneficiary-led
Smart Cities Mission: The Smart Cities Mission is an innovative initiative by the Government aimed at enhancing economic growth and improving the quality of life of people. This will be done by promoting local development and harnessing technology for the benefit of citizens. A 100 such cities have been identified and the focus will be on the development of core infrastructure. In the long run, this will have a positive effect on the growth of realty in the region.
Make in India: Indian Prime Minister Narendra Modi launched his ambitious “Make in India” program last September. This was aimed at bringing down barriers for international companies to do business and to promote foreign investment. The idea is to transform India into a manufacturing powerhouse. This is a move in the right direction considering the increase in FDI in the recent month. Data shows that industrial production is up by 2.7%, up from a dismal 0.6% in the previous year.
GST: The impact of the impending GST Bill across various sectors will be undeniable, ensuring transparency and better markets for international brands doing business in India. All this will translate to a better real estate industry.
So if 2015 was not really your year to buy a home, 2016 promises to have a lot in store.
Feroze Khan has a wealth of expertise in the Real Estate industry spanning from Operations, Strategy and Marketing. He has 20 years of experience behind him.
Feroze Khan is the COO at Vakil Housing.