Real estate – will it run away?

By Accommodation Times News Services

I heard my father say that he never knew a piece of land run away or break. That is the wisdom
John Adam (the 2nd President of the United States) shared in his autobiography. While we do agree
with John Adam’s father literally, the question today is if the Indian realty will in fact not run away or
break metaphorically.

A sector, which by convention, was popular amongst the richest and aspired for by all… has it really

Since the foreign investments in the sector started pouring, the skyline in the most happening cities
in India is undergoing a change. Lately, the twin-effect of the global economic crisis and the socio-
political and economic issues that India is grappling with, have made investors and real estate buyers
wary. The sector also faces some inherent issues. The long-standing agenda of digitisation of land
records, standardised valuation mechanism and uniform stamp duty levies across the country, still
remains to be addressed.

As per the PwC and ULI report “Emerging Trends in Real Estate® Asia Pacific 2013”, rankings of
Bangalore, Mumbai, and Delhi have slipped sharply in the list of top investment and development
destinations in Asia Pacific. Nevertheless, India’s favourable demographics; inherent and latent
demand lightens this sector’s expedition. As per the report of India Ratings (part of Fitch Group
Company) released on 16 January 2013, outlook for the country’s real estate sector for 2013 has been
revised to “stable” from “negative”.

Policy changes pertaining to multi-brand retail and foreign debt for affordable housing are some of
the recent Government initiatives, but there is more required to lead the change…

Is the upcoming Budget an opportunity?

Solace may be brought to the transitioning Indian urbane, by increasing the limit for interest
deduction on housing loans and compressing the period of holding residential property to avail of
concessional tax rate on resale. Reintroduction of tax incentive for developers earlier available for
housing projects could spark the residential market.

On the capital markets side, implementation of Real Estate Investment Trust regulation will
permit retail and institutional money to be channelled into build-to-lease assets (like malls, SEZs,
commercial use assets). This will help the developers monetise such assets and release locked-in
funds for more projects.

Action on the policy front could be the tipping point that the sector is waiting for. In any case, the
Indian real estate sector has always been a marathon, so should the marathon be sprinted?

C0-authored by Bhairav Dalal, Associate Director, PwC and Divya Kumar, Senior Manager, PwC

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