Real estate sees 10% increase in quarterly sales thanks to pre-election sops

The government's pre-election bonanza for residential real estate seems to have worked well, resulting in over 10 per cent increase in sales in the March quarter besides an upswing in new launches.

Conventionally, the period between the announcements of election dates till declaration of final results saw the real estate market move with caution as buyers adopted a wait-and-watch policy in anticipation that the newly elected government may offer some sops.

"Interestingly, 2019 is proving to be different. We estimate more than 10 per cent increase in sales across top seven cities in the first quarter of 2019, while new launches are estimated to see over 20 per cent rise", Anuj Puri, Chairman, ANAROCK Property Consultants, told Business Today.

This is largely due to the triple benefits offered by the government in less than just two months of 2019. The government doled out sops in the budget for developers undertaking affordable housing projects as well as measures to boost second home buys. It also reduced the GST rates on both affordable and premium housing, which was further propelled by a decline in home loan rates post RBI's repo rate cut.

Niranjan Hiranandani, co-founder and MD of Hiranandani Group and President of industry association Naredco, said sales had picked up in the last two months following the measures undertaken by the government. "We are seeing that buyer interest is back in the market. Especially the reduction in GST from 12 per cent (with input tax credit) to five per cent (without ITC) for premium homes is attracting a lot of people", he said.

Puri pointed out that affordable housing was keeping the momentum going with both new supply and sales going up. "Even the leading developers- who were primarily into luxury segment- have launched projects within Rs 80 lakh budget. These projects are seeing good sales traction".

Affordable housing projects have been the biggest beneficiary of sops as not only the GST has been slashed from 8 per cent to just one per cent but builders also get full tax exemption on profits from projects registered till March 2020. "These sops have pushed sales in affordable housing even further", Puri said.

However, Rohit Poddar, Managing Director, Poddar Housing and Development, said buyers are now waiting for April 1, from when the lower GST rates will be applicable. "Real transactions will take place only next month as nobody wants to pay GST at older rates now".

Puri said the prevailing liquidity issues, further exacerbated by NBFC crisis in the last quarter of 2018, had a cascading effect on sales in early 2019. "However, the concerted efforts of both RBI and government are aiding in boosting the confidence of homebuyers, rather than further aggravating it. These sops helped fence-sitters to take the plunge and thereby increase sales for builders who keen to clear their total unsold stock of 6.73 lakh units across top 7 cities", he pointed out.

Even though, elections in previous years have seen major money being sucked out from various sources including real estate at the top, there are new laws that overtly cap the amounts that political parties can accept for campaign donations, Puri added.

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